One of the candidates for the Federal Reserve Chair, Bowman, avoids discussing whether to take over as Fed Chair and calls for a shift in the regulatory mindset towards AI and cryptocurrencies

One of the candidates for the next Federal Reserve Chair, Michelle Bowman, a Federal Reserve Governor primarily responsible for bank regulation, stated to the media on Tuesday that she is currently focused on her regulatory responsibilities, including pushing for changes to capital rules for large banks and combating the so-called "debanking" phenomenon.

When asked whether she intends to succeed the Federal Reserve Chair, Bowman avoided the question, stating she is "focused on her current work."

She reiterated her support for interest rate cuts and explicitly called for the banking industry and regulators to proactively embrace emerging technologies such as artificial intelligence, blockchain, and cryptocurrencies, or else the banking system may be marginalized in the future economy.

Focus on Regulatory Responsibilities

Bowman stated that she is currently focused on her regulatory responsibilities, including pushing for changes to capital rules for large banks and combating the so-called "debanking" phenomenon.

Bowman said:

"I have a large work agenda that we are moving forward on rapidly, and clearly, we need to complete the recommendations for bank capital rule reforms in the near term."

When asked if she is interested in serving as the Federal Reserve Chair (rather than her current role as Vice Chair for Supervision), Bowman did not respond directly. According to media reports, she is being considered by President Trump as one of the candidates for the Federal Reserve Chair position.

"I am really just focused on the work I am doing right now."

She stated that the Federal Reserve is reviewing multiple capital rules and plans to reintroduce some key measures, but these proposals will not change based on whether there is a change in the Chair position.

Bowman has initiated the development of a new capital rule that will be risk-based and, compared to the version during the Biden administration, will impose a lighter burden on large U.S. banks. According to media reports, regulators are essentially abandoning the 1,087-page version proposed two years ago and plan to unveil a new proposal as early as the first quarter of 2026.

Reports indicate that the latest plan is primarily inspired by a comprehensive review meeting on bank capital rules held by Bowman in July. This review aims to ensure that overall capital requirements are coordinated with other proposals being considered by officials, such as relaxing key leverage ratio rules.

She mentioned that regulators are awaiting public feedback on their proposal. The proposal could potentially reduce capital requirements for large bank subsidiaries by as much as 27%. The comment period will close on August 26.

Seeking to Reduce "Reputational Risk" Related Regulatory Review

Previously, under pressure from banking groups and Republican lawmakers calling for an end to unfair practices, the Federal Reserve had committed that its examiners would no longer consider "reputational risk" in bank examinations.

In another speech that day, Bowman stated that she would seek to reduce regulatory reviews related to "reputational risk" and hinted at the possibility of developing new related rules.

Previously, at the urging of some banking groups and Republican lawmakers, the Federal Reserve and other banking regulators had committed that their examiners would no longer consider "reputational risk" as a factor in bank examinations. Critics argue that this practice is unfair.

Trump has consistently criticized the practice of "debanking," which deprives certain individuals and businesses of banking services for ideological reasons. Meanwhile, some consumer advocates believe this issue has been exaggerated and question whether there is actual evidence that banking regulators have forced banks to stop providing services to specific clients solely for ideological reasons Earlier this month, Trump signed an executive order requiring banking regulators to remove "reputational risk" content from guidance and training materials and to identify banks that illegally refuse to provide financial services to customers. This order was issued after he claimed that banks had previously denied him services due to discrimination.

Reiterating Support for Rate Cuts

Bowman also reiterated her support for rate cuts on Tuesday, stating that her views have not changed even when they differed from other members of the Federal Reserve Board in July.

"The outside world already knows my position, and that's it. I haven't changed my view."

At the July meeting, the FOMC voted to keep interest rates unchanged in the range of 4.25% to 4.5%. Bowman, along with Christopher Waller, became the first Federal Reserve governors in 30 years to dissent against the majority opinion.

This dissent occurred after the White House had exerted significant pressure on the Federal Reserve in recent months, urging it to cut rates. Media reports indicated that Federal Reserve Board member Adriana Kugler resigned earlier this month, which was also seen as part of this pressure campaign.

President Trump subsequently appointed Stephen Miran, chairman of the White House Council of Economic Advisers, to replace her, and many analysts believe Miran will be more inclined to respond to Trump's monetary policy proposals, particularly regarding rate cuts.

The futures market currently predicts a 25 basis point rate cut in September, but the uncertainty in the market is greater than usual. The CME's "FedWatch" prediction algorithm shows an 83% chance of a rate cut next month. Typically, the predictions of this algorithm differ from consensus results by only a few percentage points.

Calling for Banks and Regulators to Change Their Attitudes Toward Cryptocurrency and AI

Bowman also spoke at the Wyoming Blockchain Symposium on Tuesday, stating that the banking industry and regulators must embrace the benefits brought by new technologies such as artificial intelligence and cryptocurrency, or risk becoming less relevant in the economy.

She stated that ideally, regulators should allow these new uses to "expand in a way that benefits the banking system."

"Change is coming."

"If we do not take this attitude, we risk making the banking system less important to consumers, businesses, and the economy as a whole."

She urged the banking industry to assist regulators in better understanding blockchain and digital assets, as well as the potential of new technologies in addressing issues such as fraud.

"I also want to encourage the industry to engage more with regulators to help us understand blockchain and its potential in solving other issues. I am committed to changing our attitude and culture regarding the acceptance and integration of technology, new products, and new services."

Calling for Allowing Federal Reserve Employees to Hold a Small Amount of Cryptocurrency Products

Bowman also stated that Federal Reserve employees should be allowed to hold a small amount of cryptocurrency products, arguing that real-world experience would help employees better understand and regulate activities in these financial markets, and easing investment restrictions for employees would also help attract and retain skilled bank examiners She pointed out that allowing employees to hold a "de minimis" amount of cryptocurrency and other digital assets will help them build a practical understanding of the operation of these products.

"Nothing can replace the hands-on experience of understanding the holding and transfer processes of these assets. I certainly wouldn't trust someone who has never worn skis to teach me how to ski—no matter how many books they've read or how many articles they've written."

Baumann did not specify the amount or types of assets she was referring to, but analysts believe her statement once again demonstrates the Trump administration's regulatory agencies' friendlier attitude towards the cryptocurrency industry. Previously, after a long period of requiring banks to overcome numerous review hurdles before entering the field, the Federal Reserve and other banking regulators have taken several measures to relax restrictions on banks engaging in cryptocurrency business