States and the federal government need to work together on stablecoins: Fed Governor Bowman

Federal Reserve Governor Michelle Bowman urged states and the federal government to form a partnership to regulate stablecoins as lawmakers hammer out bills to do so. 

Bowman was asked on Wednesday at the Chamber of Digital Commerce's DC Blockchain Summit about what roles states and the federal government should take to address stablecoins. The Republican top Fed official said there is more of an "openness at the state level to have conversations about this expansion into the space."

"The important part to me is that there's a partnership," Bowman said. 

"U.S. currency brings with it risks of runs and other types of risks that may require protections that we provide to the U.S. dollar," Bowman said. "So it's important that from the Federal Reserve's perspective that we have the ability to input and work together with whatever that framework ends up looking like, whether it's one of the current bills or something else as the potential for creating stablecoins in the United States moves forward, that the Federal Reserve has a seat at the table." 

Ongoing legislation

Though Bowman did not mention any specific legislation, lawmakers, including House Financial Services Committee Chair Patrick McHenry, R-N.C., and ranking Democrat Maxine Waters, D-Calif., have been working to craft stablecoin legislation for almost two years. 

One hang-up in their bill has been who would be the primary regulator for stablecoin issuers—the federal government or state regulators. Last summer, Waters called the stablecoin bill "deeply problematic" due to a provision that allows state regulators to approve stablecoin issuances without Federal Reserve input. It is unclear whether that has been resolved.

Sens. Cynthia Lummis, R-Wyo., and Kirsten Gillibrand, D-N.Y., introduced a bill in April that has a provision to create "federal and state regulatory regimes for stablecoin issuers that preserves the dual banking system." Specifically, the bill creates a cap, allowing "state trust companies to create and issue payment stablecoins up to $10 billion."

Gillibrand said on Wednesday that she wants to get a vote on that stablecoin bill. 

"We haven't been able to get a hearing or a markup or even a debate in the committees of jurisdiction," Gillibrand said at a separate panel at the DC Blockchain Summit. "So I've been somewhat frustrated because we need to do the work." 

She added that the two have worked well with Treasury and the Fed, but that "nobody necessarily at the White House that's focused on these issues."