Federal Reserve Governor Michelle Bowman says while “cryptocurrency activities can pose significant risks,” the Fed does not want to “hinder innovation.” She added: “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.”

Fed Governor on Crypto, US Economy, and Inflation

Michelle Bowman, a member of the Board of Governors of the Federal Reserve System, talked about cryptocurrency, the U.S. economy, and the Fed’s effort to lower inflation Tuesday at a Florida Bankers Association Leadership event in Miami.

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…