Fed Bowman proposed four core principles of digital asset supervision: certainty, targetedness, protection and competitiveness

Michelle Bowman, Vice Chair for Supervision of the Federal Reserve, put forward four core principles for digital asset regulation at the Wyoming Blockchain Symposium, marking a fundamental shift in the Federal Reserve's attitude towards blockchain innovation.

Regulatory certainty: It aims to eliminate the problem that vague regulatory standards hinder blockchain investment and bank cooperation, and prevent enterprises from turning to alternative solutions outside the banking system.

Targeted regulation: It requires regulators to assess risks based on specific application scenarios, avoid one-size-fits-all regulation based on the "worst-case" presupposition, and recognize the differences between digital assets and traditional financial instruments.

Consumer protection: It ensures that digital asset products comply with existing consumer protection regulations, prohibits unfair or fraudulent operations, and incorporates anti-money laundering and bank safety and soundness standards.

U.S. competitiveness: It aims to position the United States as a global innovation destination and avoid weakening its leading position in the field of financial technology due to an unreasonable regulatory framework.

In addition, Bowman announced that the Federal Reserve has removed the "reputational risk consideration" in bank supervision, allowing banks to safely provide services to legally operating cryptocurrency companies, and that bank customer selection decisions are made independently by management rather than regulatory intervention. She also proposed allowing Federal Reserve staff to hold a small amount of digital assets to gain an in-depth understanding of blockchain operations, and emphasized the importance of tokenization technology and stablecoins in improving financial efficiency.

Summary

Michelle Bowman, Vice Chair for Supervision of the Federal Reserve, acknowledged that cryptocurrency companies have encountered interruptions in banking services due to regulatory uncertainty.

At the Wyoming Blockchain Symposium on August 19, Bowman also announced that the Federal Reserve's attitude towards blockchain innovation will undergo a fundamental change.

She revealed that the Federal Reserve removed the "reputational risk consideration factor" from bank supervision at the end of June to eliminate obstacles for financial institutions to provide services to legally operating digital asset companies.

The Federal Reserve official said: "Your (cryptocurrency) industry has long faced many obstacles due to bank regulators adopting vague standards, issuing conflicting guidelines, and making inconsistent regulatory interpretations."

Bowman emphasized that banks should not be penalized for serving legally operating customers, and pointed out that customer selection decisions are "entirely within the authority of bank management" rather than being intervened by regulators.

In addition, she mentioned that the Federal Reserve has shifted from an "overly cautious mindset" and begun to support the traditional banking system in embracing blockchain technology.

She warned that regulators must choose between "formulating technical frameworks" and "allowing innovation to completely bypass banks". The latter may weaken the economic relevance of the banking industry.

Currently, the Federal Reserve is updating review manuals and regulatory materials to ensure the long-term implementation of the policy of "removing reputational risks".

Bowman put forward four core principles that guide the new direction of the Federal Reserve's digital asset regulation.

"Regulatory certainty" is the primary principle, aiming to address the industry's concern of "daring not to invest in blockchain development due to the lack of clear regulatory standards".

Bowman questioned: If enterprises know that cooperating with banks will face regulatory uncertainty, will they still choose to cooperate instead of turning to alternative solutions outside the banking system?

"Targeted regulation" constitutes the second principle, requiring regulators to assess application scenarios based on specific circumstances rather than regulating based on the "worst-case" presupposition.

The Federal Reserve must recognize the unique differences between digital assets and traditional financial instruments, and at the same time avoid adopting a one-size-fits-all approach that cannot solve actual risk situations.

"Consumer protection" is the third principle, ensuring that customer-oriented products comply with existing consumer protection regulations, including prohibiting unfair, fraudulent or abusive operations.

The digital asset regulatory framework must incorporate the Bank Secrecy Act and anti-money laundering requirements, while maintaining the safety and soundness standards of banks.

"U.S. competitiveness" constitutes the final link of the framework, which aims to position the United States as the world's premier innovation destination. Bowman warned that if a reasonable regulatory framework cannot be established, the long-term leading position of the United States in the development of financial technology may be at risk.

Bowman announced that the Federal Reserve's "innovation supervision" work will be re-integrated into the reserve bank review team to restore the regular regulatory process for bank innovation activities.

She proposed allowing Federal Reserve staff to hold a small amount of digital assets to gain an in-depth understanding of the operation mechanism of blockchain, and compared this necessity to practical learning rather than theoretical learning.

Editor's note: This is a stark contrast to the previous attitude of the U.S. government, especially the position of former SEC Chairman Gary Gensler. Gensler once taught university-level blockchain courses at the Massachusetts Institute of Technology, but admitted that he had never held any digital assets or personally executed a transaction, that is, he had never actually接触 blockchain with his own funds.

The Federal Reserve recognizes that tokenization helps accelerate the transfer of asset ownership while reducing transaction costs and settlement risks. Bowman pointed out that banks of all sizes, including community institutions, can benefit from the efficiency improvements brought by asset tokenization technology.

In addition, she emphasized that the passage of the GENIUS Act and its signing by the President have positioned stablecoins as an important part of the financial system, which has a profound impact on traditional payment channels.

Bowman called for industry participation to help regulators understand the ability of blockchain to solve more problems beyond existing application scenarios.

She specifically requested the industry to provide opinions on how to use new technologies to combat fraud, and regarded it as an important opportunity for the Federal Reserve to cooperate with the digital asset field.

Bowman finally concluded: In the process of building a more modern and efficient financial system, innovation and regulation complement each other rather than oppose each other.

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