Insights from Michelle Bowman on fostering innovation, de-banking financial institutions, and combating financial fraud
Federal Reserve Governor Michelle Bowman Advocates for Balanced Regulation in Digital Asset Sector
Federal Reserve Governor Michelle Bowman has called for a pragmatic, transparent, and tailored regulatory framework for the digital asset sector, emphasizing the importance of fostering innovation while ensuring safety and soundness.
In a speech to the Kansas Bankers Association, Bowman expressed her stance on regulation, stating that it should be innovation-friendly, risk-focused, and avoid overly aggressive measures that might hamper fintech. As Vice Chair for Supervision since June 2025, her approach acknowledges the changed technology environment and the need for adaptive regulation to protect consumers without stifling innovation.
Bowman is particularly concerned about financial fraud, which has become a significant national security concern. She supports regulatory and supervisory measures alongside improved fraud education and data-sharing initiatives to mitigate such risks in the evolving technological landscape. She has shown commitment to collaborating extensively with state and federal partners, including law enforcement, to combat rising payments fraud.
Regarding de-banking decisions, Bowman has not made any direct statements on specific controversies. However, her regulatory philosophy suggests a concern for maintaining fair access while managing fraud risks and regulatory clarity. She advocates for a regulatory framework that allows the private sector to innovate, while regulators maintain transparency and open communication.
Bowman also emphasizes the need for a more focused approach to supervision, emphasizing the importance of examiners with independent judgment and a stronger supervision. She stresses the need for regulators to understand the risks and benefits of new technologies before developing a supervisory posture, especially when using the 'soft' power of supervision to discourage its use.
The cost of compliance, according to Bowman, falls to banks and their customers. She advocates for reasonable constraints on banking agency growth to avoid the parallel growth in staff and budgets. By providing clarity and consistency, regulators can encourage long-term business investment and avoid reducing the availability of banking services.
In other news, Michael Barr, the current vice chair for supervision, is resigning effective Feb. 28. Bowman is reportedly a front-runner to serve as the Fed's next vice chair for supervision.
The digital asset sphere is reportedly the source of several de-banking allegations. Bowman has advocated for bankers being responsible for their own credit allocation decisions and for regulators to change approaches that have resulted in credit allocation decisions. She promotes an environment that allows legitimate bank customers to obtain banking services.
In conclusion, Bowman's stance is clear: she is supportive of innovation-friendly, risk-focused regulation, critical of overly aggressive bank regulations that might hamper fintech, actively engaged in efforts to address financial fraud, and advocates for financial inclusion in the context of new technologies.
In light of her advocacy for balanced regulation, it is expected that Federal Reserve Governor Michelle Bowman will promote business growth in the digital asset sector by fostering innovation, protecting consumers, and ensuring safety through a tailored regulatory framework. By adopting technology-focused regulation, she aims to position the sector for sustainable growth while addressing concerns like financial fraud, de-banking allegations, and the cost of compliance.
