Federal Reserve Board Governor Michelle Bowman shared her views on financial innovation in a speech at Harvard Law School on October 17. Bowman has spoken several times on the issue and her position appears to be becoming more bearish.
Bowman spoke at length about central bank digital currency (CBDC) and stablecoin. He also considered โunified ledgerโ technology and distributed ledger technology as a bridge between existing systems, as well as ways to improve existing technology. She repeated questions you've asked before about the need for such innovations and suggested that banks can play a role in preventing government overreach:
"America's intermediate banking model helps insulate consumers' financial activities from unnecessary government overreach, and I believe this is an appropriate model for future financial innovation."
Bowman, a Republican, echoes concerns emerging increasingly heard among politiciansfrom congressmen to governors, although he did not explain exactly how banks avoid overreach.
A CBDC could lead to banking disintermediation if not designed โproperly,โ he said. Furthermore, the financial system faces issues such as โfrictions within the payments system, promoting financial inclusion and providing the public with access to secure central bank money,โ but saw no compelling arguments for the superiority of the CBDC over other alternatives.
In particular, Bowman did not see any advantage in CBDCs over the FedNow service introduced in July. The Federal Reserve has stated that would not issue a CBDC in US dollars without a mandate from Congress.
Related: US Federal Reserve Banks Say Stablecoins Could 'Become a Source of Financial Instability'
Bowman too reiterated its call for a regulatory framework for financial innovation according to the principle of the same regulation for the same risks. The low level of regulation of stablecoins was their main argument against their use.
Governor Bowman's speech on responsible innovation in money and payments: https://t.co/gkYjDmRVYO
โ Federal Reserve (@federalreserve) October 17, 2023
According to Bowman, some friction in the payments system exists by design. โPerceived payment limitations do not always arise from problems with existing technology, but rather from existing policies and laws and even consumer and business preferences,โ he said, mentioning anti-money laundering and anti-money laundering as examples. the prevention of overreach.
Bowman spoke in favor of research, including CBDC. In this sense, she has broken with some politicians. "The Federal Reserve remains open to multiple options to improve the payments landscape," she said.
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