• Fed promises that there will be stablecoin regulations for banks and issuers. 
• New regulations will offer safety to users of stablecoins and still allow technology to thrive. 
• Regulators seek balance and the most appropriate methods to minimize unseen risks in the sector. 

The Federal Reserve senior bank supervisor, Michelle Bowman, said that there will soon be new regulations for banks and issuers of stablecoins. According to her, regulators seek more definite policies on crypto because the crypto operations keep drawing closer to conventional banks. 

Regulators Aim for Fair Stablecoin Rules

According to Bloomberg, Bowman stated that the objective is to ensure the security of the financial system. It also aims to allow technology to thrive. She further said that stablecoins are now large enough to require close monitoring.

Her remarks indicate a strong approach to the issuance of tokens by companies and the banking practice that comes with it. As Bowman puts it, stablecoin firms should operate under strict rules, which will ensure they can gain trust similar to banks.

She observed that other companies want to have the trust of banks without wanting to assume the same responsibilities. Her statements refer to the increasing competition between crypto companies and banks.

Each party is seeking a level playing field in terms of regulation. However, Banks fear that crypto companies might receive an unfair advantage. 

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New Regulations Reinforce Stablecoin Supervision  

Cryptocurrency companies argue that they should have access to the same systems as banks. Thus, they can be equally competitive. According to Bowman, the new regulations are needed to bring a level of fairness between the industries and minimize hidden risks.

She mentioned that the Fed is going to collaborate with other agencies to establish capital and diversification rules for stablecoin issuers. These regulations belong to the Genius Act. Here, companies are required to keep a dollar of each of the tokens they issue.

Bowman thinks that such a structure will increase user confidence. She further indicated that regulators will provide more transparent instructions on new cases concerning digital assets.

The possible advantages of new financial technology were also reported by Bowman. According to her, innovation would increase access to credit and accelerate banking services.

U.S. Policies Revolve Around Stablecoin Oversight

However, the Fed supervisor cautioned that technology would never replace human supervision. She explained that she’s not negative about innovation.

However, she added that stability should be the highest priority. Her remarks are an indication of a wider change by regulators.

Stablecoins are no longer subject to the fringes of the regulation of banking entities. Rather, they are now a subject of overall banking policy. Based on the comments by Bowman, the regulators now think of digital assets as a viable component of a financial system.

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