Federal Reserve Governor Stephen Miran stated on Friday that the widespread adoption of stablecoins could compel the central bank to maintain lower short-term interest rates than it would otherwise set. These remarks are among the first significant pronouncements from a Fed official regarding how the growth of digital currencies might influence monetary policy.
Key Points on Stablecoin Impact
Miran argued that the expansion of stablecoins would lead to an increased supply of loanable funds within the economy, thereby decreasing the neutral interest rate, commonly referred to as R-star.
The Fed governor also indicated that stablecoins denominated in U.S. dollars are already contributing to a rise in demand for U.S. Treasury bills and other liquid assets from international buyers, which in turn reduces government borrowing costs.
Miran drew a comparison between the potential effects of stablecoin growth and the period of abundant global savings that kept U.S. interest rates suppressed for several years leading up to the 2008 financial crisis.
Stablecoin Expansion and Interest Rate Policy
Governor Miran presented his analysis in prepared remarks delivered at the BCVC Summit 2025 in New York. He suggested that even conservative projections for stablecoin growth imply "an increase in the net supply of loanable funds in the economy that pushes down" the neutral interest rate.
The neutral rate, or R-star, is defined by economists as the short-term interest rate that neither stimulates nor restricts economic growth.
"If R-star is lower, policy rates should also be lower than they would otherwise be to support a healthy economy," Miran stated. He cautioned that "a failure of the central bank to cut rates in response to a reduction in R-star is contractionary."
Stablecoins are a type of cryptocurrency specifically designed to maintain a stable value relative to a fiat currency, such as the U.S. dollar. While the broader cryptocurrency market is known for its volatility, stablecoins have found increasing acceptance within the traditional financial system.
Dollar Dominance and Demand for Treasuries
Miran elaborated that stablecoins denominated in U.S. dollars enhance the attractiveness of the dollar and dollar-denominated assets, creating broader economic consequences for the United States. "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 remarked.
The Fed governor observed that "stablecoins are already increasing demand for U.S. Treasury bills and other dollar-denominated liquid assets by purchasers outside the United States."
He further commented that "this demand will continue growing" and "this new demand lowers borrowing costs for the U.S. government."
The potential strengthening of the dollar's global standing through stablecoin adoption could influence the Federal Reserve's 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 explained.
Miran drew parallels to the economic conditions observed in the years preceding the 2008 financial crisis, a period characterized by substantial global savings that helped to depress U.S. interest rates. He posited that the widespread adoption of stablecoins could foster a similar economic environment, one that would contribute to keeping Fed rates low and increase the probability of the central bank lowering its target rate to near-zero levels.
Understanding Key Economic Terms
R-star, also known as the neutral interest rate, serves as a crucial benchmark for Federal Reserve policymakers when they are determining interest rate levels. When the Fed's policy rate is set above R-star, it signifies restrictive monetary policy, which typically slows down economic activity. Conversely, when policy rates are set below R-star, the Federal Reserve is implementing stimulus measures to boost the economy.
Stablecoins distinguish themselves from other cryptocurrencies, such as Bitcoin, by being pegged to traditional currencies or other assets. The most prominent stablecoins maintain reserves of dollars or Treasury securities to back their stated value.
Future Outlook
Governor Miran, who is the newest member of the Federal Reserve's policymaking body, did not offer any commentary on the immediate monetary policy outlook in his prepared remarks. The governor is currently on leave from his position in the Trump White House and has previously expressed support for significant interest rate reductions. His speech represents an initial effort to explore how the expanding stablecoin market might potentially alter the Federal Reserve's policy framework in the coming years.