Fed's Miran says stablecoin growth will push down rates over time

[Huntington office building in Pittsburgh, Pennsylvania, USA.]
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Federal Reserve Governor Stephen Miran said Friday that the rise of stablecoins is expected to push down the U.S. economy's neutral interest rate -- the rate that neither stimulates nor restricts economic growth -- forcing policy rates lower over time.

"Even relatively conservative estimates of stablecoin growth imply an increase in the net supply of loanable funds in the economy that pushes down r*, Miran said in remarks prepared for delivery at the BCVC Summit at the Harvard Club of New York City, referencing the neutral rate.

Stablecoins are a type of crypto designed to maintain a steady value, typically pegged to a fiat currency like the U.S. dollar, and backed by reserves such as cash or short-dated Treasuries. As demand for stablecoins grows, issuers must hold more of these safe, liquid assets to back their tokens, a dynamic that's expected to drive up demand for Treasuries and potentially push their yields lower.

“If R-star is lower, policy rates should also be lower than they would otherwise be to support a healthy economy,” he said [https://www.federalreserve.gov/newsevents/speech/miran20251107a.htm]. “A failure of the central bank to cut rates in response to a reduction in R-star is contractionary.”

Miran has urged the Fed to move swiftly with a series of large rate cuts to align its policy rate with what he views as the neutral level. In mid-October, he said "there are more downside risks" [https://seekingalpha.com/news/4504309-fed-governor-miran-its-more-urgent-to-get-rate-to-neutral-quickly] to the economy than a week ago, and monetary policy should reflect that.

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