Federal Reserve Governor Stephen Miran said Friday that widespread stablecoin adoption could force the central bank to maintain lower short-term interest rates than it would otherwise set. The remarks represent one of the first major statements from a Fed official on how digital currency growth might reshape monetary policy.
What to Know:
- Miran argued that stablecoin expansion would increase the supply of loanable funds in the economy, pushing down the neutral interest rate known as R-star
- The Fed governor said dollar-denominated stablecoins are already boosting demand for U.S. Treasury bills and other liquid assets from foreign buyers, lowering government borrowing costs
- Miran compared the potential impact to the period of excess global savings that kept U.S. interest rates depressed for years before the 2008 financial crisis
Stablecoin Growth and Interest Rate Policy
Miran delivered his analysis in prepared remarks for the BCVC Summit 2025 in New York. He said even conservative projections for stablecoin growth suggest "an increase in the net supply of loanable funds in the economy that pushes down" the neutral rate.
The neutral rate, called R-star by economists, represents the short-term interest rate that neither accelerates nor slows economic growth.
"If R-star is lower, policy rates should also be lower than they would otherwise be to support a healthy economy," Miran said. He warned that "a failure of the central bank to cut rates in response to a reduction in R-star is contractionary."
Stablecoins are cryptocurrencies designed to maintain a stable value against the dollar. While the broader digital asset sector remains highly volatile, stablecoins have gained traction in the traditional financial system.
Dollar Dominance and Treasury Demand
Miran said dollar-denominated stablecoins enhance the appeal of the dollar and dollar-based assets, creating ripple effects across the U.S. economy. "Stablecoins are also contributing to the dollar's dominance by allowing an ever-growing share of people around the globe to hold assets and conduct transactions in the most trusted currency," he said.
The Fed governor noted that "stablecoins are already increasing demand for U.S. Treasury bills and other dollar-denominated liquid assets by purchasers outside the United States."
He added that "this demand will continue growing" and "this new demand lowers borrowing costs for the U.S. government."
The strengthening of the dollar's global position through stablecoin adoption could influence Fed policy decisions. "Depending on the strength of this effect relative to other forces affecting the Fed's price-stability and maximum-employment mandates, that might be something that monetary policy reacts to," Miran said.
Miran drew parallels to the years preceding the 2008 financial crisis, when excessive global savings helped suppress U.S. interest rates. He suggested that widespread stablecoin adoption could create a similar environment, one that would keep Fed rates low and increase the likelihood of the central bank reducing its rate target to near-zero levels.
Explaining the Key Terms
R-star, or the neutral interest rate, serves as a benchmark for Federal Reserve policymakers when setting interest rates. When the Fed's policy rate sits above R-star, monetary policy is considered restrictive and tends to slow economic activity. When policy rates fall below R-star, the Fed is providing stimulus to the economy.
Stablecoins differ from other cryptocurrencies like Bitcoin in that they are pegged to traditional currencies or assets. The largest stablecoins maintain reserves of dollars or Treasury securities to back their value.
Looking Ahead
Miran, the Fed's newest policymaker, did not address the near-term monetary policy outlook in his prepared remarks. The governor is on leave from serving in the Trump White House and has previously advocated for aggressive interest rate cuts. His speech marks an early effort to examine how the growing stablecoin market might alter the Fed's policy framework in the years ahead.