Steve Miran said rising demand for dollar-pegged stablecoins could lower the U.S. neutral interest rate

Trump-appointed Federal Reserve Governor Stephen Miran, known publicly in policy circles as Steve, told an audience of economists in New York on Friday that the fast-growing demand for stablecoins tied to the U.S. dollar may be pushing the U.S. neutral interest rate lower.

According to reporting from Bloomberg, Steve said that a situation like that would likey require the Federal Reserve to adjust its own policy stance to avoid slowing the economy by mistake.

Steve said the surge of stablecoins is drawing heavy demand toward U.S. Treasury bills and other highly liquid dollar instruments, especially from buyers outside the United States, which then adds to the supply of loanable money in the economy.

When the supply of lendable funds increases, the neutral rate (the level of interest that supports steady growth without overheating or dragging activity) can drift downward.

Steve said that if the neutral rate is plunging, then the Federal Reserve must respond by lowering its policy rate, otherwise it risks tightening conditions unintentionally.

He described the situation plainly, saying “Stablecoins may become a multitrillion-dollar elephant in the room for central bankers.” He added that the buildup of stablecoins is already influencing markets and will keep doing so as adoption grows.

Stablecoin growth pressures interest benchmarks

Steve referred to existing research to say that expanding stablecoin usage could lower the Federal Reserve’s benchmark rate by around 0.4 percentage point. That figure aligns with the pattern of his policy views during his tenure.

Since joining the Fed, Steve has repeatedly argued for deeper and faster rate cuts, saying the commonly assumed neutral rate is too high. He has said that holding rates above the true neutral level risks slowing down the economy more than intended.

Until now, Steve had based most of his arguments on inflation trends and conditions in the broader economy. But the rise of stablecoins introduces a new long-term factor. By increasing the supply of money available for lending, he said, it naturally exerts downward pressure on the neutral rate for years ahead.

“Even relatively conservative estimates of stablecoin growth imply an increase in the net supply of loanable funds in the economy that pushes down the neutral rate,” Steve said. He continued, “If neutral is lower, policy rates should also be lower than they would otherwise be to support a healthy economy.”

Steve warned that refusing to respond to this shift would be “contractionary.” He is set to leave the Federal Reserve in January, when the term he is currently filling is scheduled to end.

Crypto market erases yearly gains as volatility hits Bitcoin

Steve’s policy remarks come as the total market value of all cryptocurrencies (which reached nearly $4.4 trillion on October 6) saw a 20% decline that has wiped out nearly all the gains recorded earlier this year.

The crash began after the sudden liquidation of roughly $19 billion in leveraged positions, which shook confidence among traders and left the market struggling for direction. Few market participants are currently betting on a strong rebound, per data from CryptoQuant.

This downturn stands out because this year had been marked by stronger recognition of crypto from regulators, major banks and institutional investors. President Donald Trump’s push to position the United States as the central hub of global crypto activity earlier contributed to rising enthusiasm.

Bitcoin at one point surged by 35% this year. But now the total crypto market value sits below where it was when Trump entered office.

Bitcoin has fallen 9% so far this week alone, putting it on track for its worst weekly result since March. It also fell below its 200-day moving average, a level widely monitored by traders since the 2022 bear market.

As of press time, Bitcoin was trading just under $100,000. Losses have been even heavier among altcoins, which are smaller and more volatile. They have underperformed across the board this year.

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