Federal Reserve Shifts Crypto Stance: Bowman Advocates Employee Holdings, Ends Debanking

A significant shift in regulatory philosophy is emerging within the Federal Reserve, highlighted by a recent proposal from Vice Chair for Supervision Michelle Bowman that advocates for a novel approach to understanding digital assets: allowing Fed employees to hold minimal amounts of cryptocurrency. This pragmatic suggestion underscores a growing recognition within top financial institutions of the need for experiential insight into a rapidly evolving sector.

• Federal Reserve Vice Chair Michelle Bowman proposes allowing Fed employees to hold small amounts of cryptocurrency to gain practical understanding.
• The Federal Reserve’s evolving strategy emphasizes harmonizing financial stability with fostering innovation and supporting consumers and businesses.
• Key technological considerations include tokenization, blockchain integration into core financial processes, and the strategic use of AI to combat illicit financial activities.
• The Fed is discontinuing “reputational risk” as a supervisory factor, directly addressing the practice of “debanking” for innovative industries.
• Direct exposure to digital assets is deemed crucial for the Fed’s ability to attract and retain expert talent and to ensure effective, informed regulatory oversight.

Evolving Regulatory Philosophy for Digital Assets

Speaking at the Wyoming Blockchain Symposium 2025, held from August 18 to 21, Vice Chair Bowman detailed the Federal Reserve’s evolving strategy for banking supervision in a technologically advancing landscape. She emphasized a regulatory philosophy that harmonizes a safe and sound financial environment with fostering innovation and supporting both consumers and businesses. Her address covered several critical areas, including the potential of tokenization to address long-standing inefficiencies in traditional banking, the strategic integration of blockchain into core financial processes, and the proactive assessment of artificial intelligence’s utility, particularly in enhancing efforts to combat illicit financial activities. This forward-looking perspective highlights a move towards a more specialized and proportional regulatory framework tailored for new technologies.

Addressing “Debanking” and Reputational Risk

A significant policy adjustment noted by Bowman is the Federal Reserve’s decision to discontinue the consideration of “reputational risk” as a supervisory factor. This change, which the Fed announced in June 2025, directly confronts the practice of “debanking,” where financial institutions had often denied services to cryptocurrency companies and specific political organizations, citing concerns about their reputation. The abandonment of this supervisory criterion is a critical step in ensuring fair access to financial services for innovative industries and aligns with broader governmental directives, including an executive order previously signed by President Donald Trump that mandated investigations into such debanking instances.

Rationale for Employee Exposure to Digital Assets

Central to Bowman’s address was her strategic rationale for allowing Federal Reserve employees to gain direct exposure to digital assets. She posited that while extensive educational materials exist, they cannot fully substitute for the practical experience derived from handling cryptocurrency, which is vital for comprehensively understanding aspects like the mechanics of ownership transfer. Bowman further argued that the current restrictions—which prohibit Federal Reserve employees from investing in cryptocurrencies or related derivative products, rules tightened in February 2022—could potentially hinder the Federal Reserve’s ability to attract and retain expert talent, and may also limit the existing staff’s in-depth comprehension of the underlying technology. This practical insight is deemed crucial for effective and informed regulatory oversight of the digital asset ecosystem.