The Fed Is Playing Catch-Up on Stablecoins

Congress didn't wait for the Federal Reserve to figure this out. The GENIUS Act — the Guiding and Establishing National Innovation for U.S. Stablecoins Act — has advanced through Congress in 2026, creating a regulatory framework for stablecoin issuers to operate in the United States.

Now the Fed is scrambling to understand what that means.

What a White House Economist and a Fed Governor Actually Said

Council of Economic Advisers Chair Stephen Miran delivered a speech on November 7, 2025 at the BCVC Summit at the Harvard Club in New York City. His message was direct: stablecoins have been "unfairly treated as a pariah" but are now "an established and fast-growing part of the financial landscape."

Miran pointed out something most mainstream coverage is glossing over. Stablecoins don't just facilitate crypto trading anymore. They provide a stable store of value, a payment mechanism, and the ability to move capital across borders — fast. Virtually all of them are dollar-denominated. Global demand for dollar assets is strong, and stablecoins are a more efficient delivery mechanism.

His warning: economic research hasn't kept up. Stablecoin growth affects the supply of loanable funds in the entire U.S. economy. The Fed doesn't fully understand the transmission effects yet.

Bloomberg reported separately that Fed Governor Christopher Waller has argued stablecoins will broaden the reach of U.S. monetary policy. But Waller's own 2021 speech at the American Enterprise Institute — also published on federalreserve.gov — showed him questioning whether government-issued digital currency (CBDC) solved any real problem. His current position on private stablecoins reflects a shift in how the Fed is thinking.

The Banking System Is in the Crosshairs

A December 17, 2025 research note published by the Federal Reserve — authored by Fed economist Jessie Jiaxu Wang — lays out three specific ways stablecoin growth could hit traditional banks.

First: deposits. When people move money into stablecoins, they may be pulling it directly out of bank accounts. That changes how banks fund themselves, their liquidity risk, and their cost of capital. Wang notes it's not that simple — stablecoins can "reduce, recycle, or restructure" deposits rather than just drain them. But the uncertainty itself is a problem.

Second: credit. If banks lose deposits, they have less to lend. That affects the quantity of loans, the terms, and which sectors and institutions get credit. Smaller banks with fewer alternative funding sources are most exposed.

Third: structural change. Banks could lose their central role in the payment ecosystem entirely. This concern appears in a Federal Reserve research paper published in December 2025.

What Mainstream Media Is Getting Wrong

Most coverage of stablecoins falls into one of two categories.

The crypto-friendly press treats this like a pure win — deregulation, innovation, dollar dominance, full speed ahead. The skeptical mainstream press frames it as dangerous, unregulated speculation threatening financial stability.

Both are missing something important.

This isn't about crypto speculation. It's about the plumbing of the U.S. financial system being rewired while regulators and economists work to understand the consequences. CEA Chair Miran said explicitly that "economic research has some catching up to do." Senior economic policymakers are admitting they are behind the curve on something Congress is already moving to make law.

A basic question: if the Fed doesn't understand how stablecoins affect monetary policy transmission, how does it know its interest rate decisions are actually working the way it thinks?

The Dollar Angle

Miran's speech contains a significant point. Dollar-denominated stablecoins are spreading globally. That reinforces dollar dominance in international trade and finance — which benefits American economic power and national security.

But it also means the Federal Reserve's policy decisions ripple through these new channels in ways the Fed hasn't fully mapped. A rate hike or cut doesn't just move through U.S. banks anymore. It moves through a growing global stablecoin ecosystem that the Fed doesn't directly control.

China is watching all of this. They've been pushing the digital yuan for years precisely to challenge dollar dominance. A well-regulated U.S. stablecoin ecosystem that extends dollar reach globally is a direct counter to that strategy.

The GENIUS Act: Moving Forward

Congress has acted. The GENIUS Act passed the Senate in 2026, advancing a regulatory framework for stablecoin issuers to operate and expand in the United States.

The question isn't whether this happens. It's whether the Federal Reserve and the banking system can adapt fast enough — and whether policymakers who are already behind the research curve will catch up before something breaks.

Regular Americans with money in a checking account, a savings account, or a 401(k) that holds bank stocks have a stake in this. The Fed's own research says so.