Fed’s Miran Sees Bank Deposits Safe from Stablecoin Surge

“Because GENIUS Act payment stablecoins do not offer yield and are not backed by federal deposit insurance, I see little prospect of funds broadly fleeing the domestic banking system,” Miran said in prepared remarks to the BCVC Summit, an annual event hosted by venture capital firm Bloccelerate VC. 

$3 trillion adoption

The Trump appointee said private sector estimates compiled by the US central bank staff project that stablecoin adoption could reach between $1 trillion and $3 trillion by the end of the decade.

“Stablecoins may become a multitrillion-dollar elephant in the room for central bankers,” he said. 

Concerns that some third parties can bypass the ban on paying interest or yield on payment stablecoins has led the American Bankers Association to push for a broad interpretation of the GENIUS Act to ban such activities by any party including affiliates or exchanges. GENIUS was passed by the US Congress in July.

Treasury holdings

Miran noted that the Fed’s holdings of US Treasury securities expanded by just over $3 trillion in the latest round of quantitative easing triggered by the COVID-19 pandemic. Less than $7 trillion in Treasury bills is currently outstanding.

“If these forecasts prove accurate, the magnitude of additional demand from stablecoins is too large to ignore,” Miran said.

Lower rates

He also used the New York City event to repeat his assertion that the Fed needs to lower interest rates, a popular refrain from President Trump.

The projections of stablecoin growth suggest that loanable funds will increase, which leads to a pressure on the R-star or neutral rate. 

Economists refer to the R-star as the policy interest rate that neither stimulates nor restricts economic activity. 

“If R-star is lower, policy rates should also be lower than they would otherwise be to support a healthy economy,” Miran said. “A failure of the central bank to cut rates in response to a reduction in R-star is contractionary.”

Miran has advocated additional interest rate cuts by the Fed to bring its policy rate closer to the neutral rate.

He cited 2024 economic research that estimated that if stablecoins are in widespread use and fully backed by US securities, interest rates could come down by as much as 40 basis points.

Non-US demand

Miran noted that some jurisdictions block access to US reserve assets and the dollar and that stablecoins might offer “an easier means for the financially repressed to enjoy these global public goods and evade draconian restrictions on their finances”. 

“The real opportunity in stablecoins is to satiate untapped foreign appetite for dollar assets from savers in jurisdictions where dollar access is limited,” he said, adding that the demand from these areas will in turn benefit dollar assets.