Federal Reserve Governor Stephen Miran on Friday said that if stablecoins end up enjoying widespread adoption it could mean the central bank needs to keep short-term interest rates lower than they would otherwise be.
“Even relatively conservative estimates of stablecoin growth imply an increase in the net supply of loanable funds in the economy that pushes down” the economy’s neutral rate, Miran said in the text of a speech to be delivered before the BCVC Summit 2025 in New York.
The neutral rate, which is the short-term interest rate that neither stimulates nor slows the economy, is called R-star. And if R-star “is lower, policy rates should also be lower than they would otherwise be to support a healthy economy,” Miran said, adding “a failure of the central bank to cut rates in response to a reduction in R-star is contractionary.”
Stablecoins are cryptocurrencies designed to have a stable value versus the dollar, and while the broader sector remains extremely volatile, stablecoins are increasingly being integrated into the financial system. Miran said dollar-denominated stablecoins make the dollar and other dollar assets more attractive, with implications for 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,” the official said.
He added, “stablecoins are already increasing demand for U.S. Treasury bills and other dollar-denominated liquid assets by purchasers outside the United States" and "this demand will continue growing.”
“This new demand lowers borrowing costs for the U.S. government,” he said.
With stablecoins likely to bolster the dollar’s value on the global stage, “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, the Fed’s newest policymaker, did not address the near-term monetary policy outlook in his prepared remarks. Miran is controversially on leave from serving the Trump White House, and has been a steadfast supporter of aggressive interest rate cuts.
Miran noted the impact of broad stablecoin adoption could be akin to the period where excessive global savings helped depress U.S. interest rates for many years ahead of the great financial crisis two decades ago. Miran noted this sort of environment, which would keep Fed rates low, would also increase the chance of the Fed cutting its rate target to near-zero levels.
