Federal Reserve Vice Chair Michelle Bowman stated that the central bank should lift the ban on employees purchasing cryptocurrencies.

The Federal Reserve's top regulatory official stated that staff at the U.S. central bank should be allowed to invest in a small amount of cryptocurrency to help them understand the technology.

Federal Reserve Vice Chair Michelle Bowman stated at a blockchain event in Wyoming on Tuesday that regulators should consider allowing their staff to 'hold a small amount of cryptocurrency or other types of digital assets so that they can have a practical understanding of their underlying functionality.'

She added, 'We will soon establish a framework to oversee the issuers of these assets.'

'Nothing can replace experimentation and understanding ownership and transfer processes.'

Currently, most Federal Reserve staff and their spouses are prohibited from owning cryptocurrencies or focusing on cryptocurrency-related products, such as exchange-traded funds or stocks of cryptocurrency companies.

After three senior officials were reported to have engaged in unusual trading activities in 2020, the Federal Reserve tightened its rules on all investments in early 2022 to take action to support the U.S. economy during the initial phase of the COVID pandemic.

Allowing cryptocurrencies could help with recruitment and rule-making

Bowman stated that the investment restrictions on Federal Reserve employees 'could become a barrier to recruiting and retaining examiners with the necessary expertise,' and easing the rules would help existing staff better understand the technology.

'If a person has never skied, I certainly wouldn't trust him to teach me how to ski, no matter how many books he has read or how many articles he has written about skiing.'

Bowman urged the Federal Reserve not to 'stagnate.'

Bowman stated in her speech that the mindset of bank regulators is 'too cautious,' and urged them to reduce their skepticism towards new financial products, 'recognizing the practicality and necessity of traditional finance embracing technology.'

She stated that some bankers are concerned that blockchain technology could threaten traditional business models, but regardless of how banks and regulators respond, the technology could 'transform the banking system.'

She added, 'We must choose whether to embrace change and help shape a reliable, durable framework—ensuring safety and robustness while balancing efficiency and speed—or to stagnate and let new technologies completely bypass the traditional banking system.'

'From a regulator's perspective, the choice is clear.'

Bowman acknowledged that there are risks in adopting new technologies, but these risks can be mitigated, 'or at least when we recognize and consider the broad benefits that new technologies may bring, these risks can be managed.'

Trump's friendly push for cryptocurrency

Bowman did not specify the types of crypto products or the quantity she suggested the Federal Reserve allow, but her comments are the latest friendly remarks from the Trump administration's regulatory department regarding crypto products.

The Federal Reserve stated on Friday that it would terminate the regulatory program aimed at cryptocurrency and blockchain-related activities for banks that was established by the Biden administration in 2023.

Earlier this month, Trump also signed an executive order directing bank regulators to investigate the cryptocurrency industry and the de-banking accusations raised by conservatives.