Fed Governor Predicts Stablecoin Surge Could Lower US Interest Rates

A leading official from the U.S. Federal Reserve has expressed concerns that the rapid expansion of stablecoins—digital tokens tied to the dollar—could significantly impact global finance and put lasting downward pressure on U.S. interest rates. In a recent speech, Fed Governor Stephen I. Miran discussed how the increasing popularity of stablecoins might lead to greater investment in U.S. Treasury securities and other dollar assets, potentially mimicking the conditions of the early 2000s economic landscape.

Key Takeaways

Stablecoins are expected to grow into a multi-trillion-dollar asset, which could influence U.S. interest rates negatively.
The Federal Reserve's current target for the federal funds rate ranges from 3.75% to 4.00%.
There is potential for stablecoins to lower the neutral interest rate by up to 40 basis points.
The stablecoin market could expand to $1 trillion to $3 trillion by 2030.
More than 1% of U.S. dollars in circulation are now in the form of stablecoins.

Fed Governor Predicts Multi-Trillion Dollar Stablecoin Boom Will Force Down US Interest Rates

The Impact of Stablecoins on Interest Rates

A senior official from the U.S. Federal Reserve has indicated that the rapid growth of stablecoins—digital tokens pegged to the dollar and currently handling trillions in transactions—could transform global finance and create persistent pressures on U.S. interest rates.

In a speech entitled “A Global Stablecoin Glut: Implications for Monetary Policy” at the BCVC Summit 2025 in New York, Fed Governor Stephen I. Miran noted that the increasing demand for stablecoins is likely to drive up purchases of U.S. Treasury securities and other liquid dollar assets. He compared the potential impact to the early-2000s "global savings glut," which resulted in decreased rates across the globe.

"Stablecoins may evolve into a multitrillion-dollar elephant in the room for central bankers,” Miran stated. “Their growth increases the supply of loanable funds in the U.S. economy, thereby putting downward pressure on the neutral interest rate.”

Trillions in Stablecoins Could Lower Neutral Interest Rate by 40 Basis Points

Miran's remarks come as the Federal Reserve holds a target range for the federal funds rate between 3.75% and 4.00%, following two cuts this year. The current effective rate is about 3.87%, down from 4.33% earlier in 2025.

According to Miran's analysis, even without additional rate reductions, the swift adoption of stablecoins could naturally lead to lower borrowing costs. By channeling trillions into dollar-backed digital assets—much of which may come from outside the U.S.—stablecoins effectively increase the availability of funds for lending, similar to how past global capital inflows helped maintain low yields in the 2000s.

Miran suggested that if current adoption trends continue, the rise of stablecoins could lower the neutral interest rate—defined as the rate at which monetary policy neither stimulates nor restricts economic growth—by as much as 40 basis points.

Under the newly enacted GENIUS Act, U.S. stablecoin issuers are required to hold reserves that are fully backed by safe and liquid dollar assets like Treasury bills, repos, and government money market funds. Miran mentioned that this will likely increase demand for U.S. debt.

The Federal Reserve anticipates that the stablecoin market could grow to between $1 trillion and $3 trillion by the year 2030, which would position it comparably with the quantitative easing programs implemented during the COVID-19 pandemic.

Stablecoins Now Represent Over 1% of U.S. Dollars in Circulation

As per Andreessen Horowitz’s “State of Crypto 2025” report, stablecoins processed $46 trillion in transactions over the previous year—a 106% increase compared to 2024—and are now competing with the U.S. Automated Clearing House (ACH) in terms of payment volume.

Collectively, stablecoin reserves hold over $150 billion in U.S. Treasuries, making them the 17th largest holder of American debt, ahead of several foreign nations.

Miran likened the rapid emergence of stablecoins to the early-2000s situation when foreign investments in U.S. debt markets pulled down yields. He warned that this trend could result in more savings chasing safe dollar assets, ultimately lowering the equilibrium or “neutral” interest rate.

Economists Marina Azzimonti and Vincenzo Quadrini previously estimated that the widespread adoption of stablecoins could drive interest rates down by approximately 40 basis points. If this projection holds true, the Fed may need to keep policy rates lower to maintain economic stability.

Miran emphasized that if the Fed does not adapt to these lower rates, monetary policy could unintentionally become "contractionary." Once considered a niche tool primarily for crypto trading, stablecoins have emerged as one of the most significant digital payment systems globally.

With transactions that settle in seconds and cost less than a cent, stablecoins are becoming increasingly popular for remittances, cross-border trade, and decentralized finance (DeFi) applications.

Data from A16z indicates that over 1% of all U.S. dollars in circulation now exist in a tokenized form on public blockchains, highlighting the growing influence of digital dollars in transforming global finance.