Fed Governor Warns "Stablecoin Glut" Would Impact Monetary Policy

Federal Reserve Governor Stephen I. Miran warned that rapid growth in foreign demand for dollar-backed stablecoins could create a "global stablecoin glut" that puts downward pressure on U.S. interest rates.

In remarks at the BCVC Summit 2025, Mr. Miran projected that as foreign demand for dollar-backed stablecoins grows to potentially trillions of dollars, issuers will have to buy an equivalent amount of safe U.S. assets, such as Treasury bills, to back them. He said this influx of foreign capital would expand the supply of loanable funds in the U.S. economy and push down the neutral rate of interest, a key guidepost for central bankers. Mr. Miran cautioned that if the Fed fails to adjust its policy rates accordingly, it could unintentionally slow the economy.

Mr. Miran said the main driver of this phenomenon is the immense and unsatisfied demand for U.S. dollars in foreign countries, especially in emerging markets and economies with capital controls. He noted that for billions of people, stablecoins offer an efficient way to hold value and make payments in dollars, bypassing local inflation, currency volatility, and restrictive financial systems.

He added that such growth in foreign demand for dollar-backed stablecoins is reinforced by the new GENIUS Act, which provides regulatory clarity and mandates the one-to-one backing of stablecoins with safe, liquid U.S. assets, thereby creating a direct channel between global demand for digital dollars and U.S. government debt.

Mr. Miran concluded that this shift could lower the neutral interest rate, increase the risk of hitting the zero lower bound, and expand the dollar’s global influence.