JACKSON HOLE, Wyo.–Federal Reserve Vice Chair for Supervision Michelle Bowman told financial institutions they need to embrace blockchain technology or risk losing relevance.
In addition, Bowman said central bank staff should be permitted to own small amounts of crypto.
In remarks to the Wyoming Blockchain Symposium, held in conjunction with the Federal Reserve’s annual policy meeting in Jackson Hole, Bowman said regulators and financial institutions must adopt a more proactive approach to the crypto industry.
“It is essential that banks and regulators are open to engaging in new technologies and departing from an overly cautious mindset,” Bowman told the meeting. “Regulators must understand new products and services and recognize the utility and necessity of embracing technology in the traditional financial sector.”
Bowman suggested FIs that fail to evolve could become peripheral players, while forward-looking institutions could strengthen their position in the market.
Example Cited
As an example, Bowman pointed to tokenization as one of the most immediate applications of blockchain, noting that tokenized assets can be transferred digitally without intermediaries or the physical movement of securities.
That approach, said Bowman, eliminates many manual steps and custodial coordination that currently creates delays and increases operational risk. Tokenized systems can streamline these steps, reduce operational friction, and expand market access, she added, noting tokenization can also combat fraud.
Staff Should Own Crypto
Separately, Bowman suggested central bank staff should be permitted to own small amounts of crypto products, saying the experience would better inform their work policing activities in those financial markets, and could also help recruit and retain expert bank examiners.
“There’s no replacement for experimenting and understanding how that ownership and transfer process flows,” Bowman said in her remarks to the meeting. “I certainly wouldn’t trust someone to teach me to ski if they’d never put on skis, regardless of how many books and articles they have read, or even wrote, about it.”
