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Growing stablecoin demand may reduce neutral rates
Federal Reserve Governor Stephen Miran told attendees at the BCVC summit in New York that surging demand for US dollar–pegged stablecoins could exert downward pressure on the economy's neutral interest rate, commonly referred to as r-star. That shift, he argued, would influence the Fed's policy choices and could prompt lower benchmark interest rates over time.
Market size and outlook
Miran cited CoinGecko data showing the current total market capitalization of stablecoins at around $310.7 million and referenced Fed research suggesting that dollar-denominated stablecoins could expand to as much as $3 trillion within five years. If stablecoins grow to that scale, their influence on liquidity, demand for US Treasuries, and the broader dollar funding market could be significant.
Stephen Miran
How stablecoins can affect interest rates and monetary policy
According to Miran, stablecoins already appear to be increasing demand for US Treasury bills and other liquid dollar assets among non-US purchasers. That external demand for Treasuries and short-term dollar liquidity can lower the equilibrium or neutral rate, which in turn alters the stance needed for monetary policy. In plain terms: larger stablecoin holdings backed by dollar assets could make borrowing costs fall over time.
Regulation's role in adoption and policy
While acknowledging a healthy skepticism toward new rules, Miran praised the GENIUS Act for providing clearer guardrails and consumer protections. He highlighted that the bill's requirement for US-domiciled issuers to maintain one-to-one reserves in safe, liquid US dollar–denominated assets is particularly relevant for monetary policymakers. Clear regulation, he suggested, would both legitimize stablecoins and influence how central banks assess related risks to the financial system.
Risks, competition, and the view from global institutions
International organizations such as the IMF and several US banking groups have warned that stablecoins could compete with traditional financial services and attract deposits away from banks, especially if they offer yield. That competitive pressure has prompted calls for tighter oversight of yield-bearing stablecoins to protect consumers and preserve financial stability. Miran framed the potential rise of stablecoins as a "multitrillion-dollar elephant in the room" that central bankers cannot ignore.
What to watch next
Market participants and policymakers will be watching several indicators: the pace of stablecoin market capitalization growth, reserve composition (US Treasuries vs. other liquid assets), regulatory progress such as the GENIUS Act, and shifts in foreign demand for dollar assets. Together these factors will determine how material the stablecoin impact on interest rates and monetary policy ultimately becomes.
Source: cointelegraph
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