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Fed Governor Bowman: We Don’t Want to Stifle Innovation; Watch Us Manipulate Money
On the one hand, Federal Reserve Governor Michelle Bowman is absolutely correct in that there is risk in cryptocurrency, as is true with every other business venture or investment. She goes on to say she doesn’t want the Fed to “hinder innovation” by which she means TradFi dipping their toe in the water of the digital asset space.
“By inhibiting innovation, we could be pushing growth in this space into the non-bank sector, leading to much less transparency and potential financial stability risk,” she told the Florida Bankers Association Leadership event in Miami on Tuesday. From Bitcoin.com:
Commenting on the collapse of crypto exchange FTX and other recent events in the crypto space, the Fed governor said: “These events have made it clear that cryptocurrency activities can pose significant risks to consumers, businesses, and potentially the larger financial system.”
Noting that she expects some banks to continue exploring “how to engage in crypto-related activities,” Bowman emphasized:
The Fed and other banking agencies will continue to focus in this area, in light of the significant risks these activities may pose. But the bottom line is that we do not want to hinder innovation.
“As regulators, we should support innovation and recognize that the banking industry must evolve to meet consumer demand,” the Fed governor continued.
“By inhibiting innovation, we could be pushing growth in this space into the non-bank sector, leading to much less transparency and potential financial stability risk. We are thinking through some of these issues and what a regulatory approach could look like,” she opined.
All of which sounds well and good. But then if you still wonder why DeFi and crypto is so eager to get away from central bank control, she inadvertently provided the answer.
Regarding the Federal Reserve’s fight against inflation, Governor Bowman stated that she has supported the Federal Open Market Committee (FOMC)’s policy actions to address high inflation over the past year. “I am committed to taking further actions to bring inflation back down to our goal,” she stressed.
The Fed governor explained that the FOMC has been tightening monetary policy since last March “through a combination of increasing the federal funds rate by 4-1/4 percentage points and reducing our balance sheet holdings.”
While noting, “we’ve seen a decline in some measures of inflation” in recent months, Bowman emphasized:
We have a lot more work to do, so I expect the FOMC will continue raising interest rates to tighten monetary policy.