Stephen Miran Says Stablecoins Are a ‘Multitrillion-Dollar Elephant’ for Central Banks

In a wide-ranging address delivered this week, Stephen I. Miran, a member of the Federal Reserve Board (Fed) Governors, issued a clarion call on the rapid growth of dollar-denominated stablecoins and the implications for U.S. monetary policy.

Miran described stablecoins as an “innovation” that has “been unfairly treated as a pariah by some,” noting that they have now become “an established and fast-growing part of the financial landscape.” 

Stablecoin market overview (Source: DefiLlama)

He emphasised that while stablecoins were “originally intended to facilitate holding and trading cryptocurrency,” their role has expanded to providing a “stable store of value, a means of payment, and the ability to move capital quickly, irrespective of territorial borders.”

Stablecoins Riding on the Dollar’s Deep Current

Because essentially all of the tokens are denominated in U.S. dollars, Miran argued, their widespread adoption reinforces the greenback’s global dominance. 

He stated, “Stablecoins are also contributing to the dollar’s dominance by allowing an ever-growing share of people around the globe to hold assets and conduct transactions in the most trusted currency.”

Indeed, he outlined a thesis that the growing use of stablecoins is already pushing up demand for U.S. Treasury bills and other dollar-denominated liquid assets by foreign holders. 

“My thesis is that stablecoins are already increasing demand for U.S. Treasury bills and other dollar‐denominated liquid assets by purchasers outside the United States… That new demand lowers borrowing costs for the U.S. government,” he said.

Monetary Policy: The R* Challenge

Miran tied stablecoins to one of the Fed’s most critical but least-visible benchmarks: the neutral interest rate, often called r* — the real short-term rate consistent neither with overheating nor under-utilisation of the economy. 

He warned that if stablecoin growth proceeds as projected, it may add a “substantial and long-term force putting downward pressure” on r*. In other words, the existence of large volumes of stablecoins — and the associated shifting flows of dollar-assets — could mean that the policy interest rate needed to keep the economy on track might be lower than previously thought.

Also read: Stablecoins Now Capture 75% of Crypto Protocol Revenue, Outpacing All Other Sectors

He framed the issue this way, “Even relatively conservative estimates of stablecoin growth imply an increase in the net supply of loanable funds in the economy that pushes down r*. If r* is lower, policy rates should also be lower than they would otherwise be to support a healthy economy.”

He went further, drawing a parallel to the “global saving glut” phenomenon described by former Fed Chair Ben Bernanke in the early 2000s. Miran estimated that if stablecoin demand for dollar-assets added, say, $2 trillion of foreign demand by the end of the decade, that could raise the U.S. current-account deficit by roughly 1.2 percentage points of GDP — or about 30 percent of the size of the original global saving glut. He noted that if growth were higher still (say $4 trillion), the effect might reach the size of 60 percent of the original saving-glut shock.

He also flagged potential secondary consequences:

• A lower r* means the Fed could find itself closer more often to the zero-lower bound (ZLB), limiting how far rates can be cut in a downturn.
• A strong dollar driven by incremental dollarisation via stablecoins could complicate the Fed’s dual mandate of price stability and maximum employment.
• Global business-cycle synchronisation might increase if dollar-based stablecoins reduce the effectiveness of floating exchange-rates as shock-absorbers.

Also read: Stablecoins Quietly Transform the Global Economy, Says a16z

Regulatory Clarity via the GENIUS Act

To support his commentary, Miran pointed to the recently adopted Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act as a pivotal turning point. He said that the Act “provides a clear regulatory pathway in the U.S. for stablecoin issuers to broaden their reach and solidify stablecoins as a core part of the payment system.”

Key features of the GENIUS Act, as cited by Miran:

• U.S.-domiciled issuers must maintain one-to-one reserves in safe, liquid U.S. dollar-denominated assets (bank deposits, short-term Treasurys, overnight repos/reverse-repos backed by Treasurys, or government money-market funds).
• The reserve requirement means that, depending on how funds are sourced, issuance of GENIUS-compliant stablecoins “may constitute new loanable funds in the U.S. economy or the overall amount of money available for borrowing and lending.”

Miran noted that even stablecoins issued outside the GENIUS Act regime (and thus subject to fewer constraints) are likely to invest heavily in U.S. dollar-securities with minimal credit risk — meaning that the effect of stable-asset issuance on dollar-asset demand could be broad-based, not just limited to regulated issuers.

Forecasts & Magnitude: Up to $3 Trillion by Decade-End?

On the question of how big stablecoin issuance might get, Miran said that Fed staff had compiled private-sector estimates projecting industry uptake reaching between $1 trillion and $3 trillion by the end of the decade, using the inter-quartile range of the estimates. 

He compared this to the roughly $3 trillion in Treasurys that the Fed purchased during its latest quantitative easing in response to COVID-19, and noted that less than $7 trillion of Treasury bills are currently outstanding. 

In short: if stablecoins hit those levels, “the magnitude of additional demand from stablecoins will be too large to ignore.”

Emerging-Market Implications and the “Bridge” Effect

Miran also discussed how stablecoins may matter outside U.S. borders, particularly in emerging-market economies (EMEs) or advanced foreign economies (AFEs) where payment-rails are restricted, capital-controls apply, or dollar access is limited. 

He described a range of “bridges” through which stablecoins might gain traction: remittances flowing from the U.S., payments to exporters denominated in stablecoins, local-currency conversions into crypto then into stablecoins, or even informal cash/asset swapping. He observed that “stablecoins merely make it easier to traverse some of these bridges and increase incentives for doing so…”

However, he flagged that those bridges will not be frictionless nor infinite in capacity — but still believed they “perforate” barriers to dollar access. For people and businesses in jurisdictions with high inflation or volatile exchange-rates, he argued, stablecoins could serve as a way to “leap-frog the challenges of high and unstable inflation or volatile exchange rates.”

Banking System, Systemic Risks and Disintermediation

While upbeat on the innovation potential of stablecoins, Miran cautioned the Fed and financial-system observers not to ignore associated risks. He raised several open questions:

• How many assets will stablecoin issuers come to manage?
• Will the funding originate from domestic deposits or foreign capital? Could significant substitution pull funds out of the banking system?
• What are the systemic-risk implications of stablecoin “runs”?

He also noted that some risk of bank disintermediation could arise if large deposits flow out of U.S. banks into stablecoin vehicles, possibly weakening monetary-policy transmission or slowing money-velocity. 

Also read: $1 Trillion Deposit Flight Looms as Stablecoins Rise, Standard Chartered Cautions

That said, he judged the risk of a broad run domestically to be “limited,” chiefly because under the GENIUS Act payment stablecoins do not offer yield and are not backed by federal deposit insurance — reducing their attractiveness as a wholesale substitutive deposit product.

Why This Matters for Crypto & Finance Watchers

For the crypto world and broader financial markets, the Fed’s rising focus on stablecoins is noteworthy for several reasons:

• It signals that stablecoins are no longer fringe or purely speculative instruments, but are perceived by central bankers as potentially macro-relevant.
• From a regulatory standpoint, the GENIUS Act clears a path for issuers in the U.S., which may accelerate institutional issuance and mainstream adoption — increasing size, footprint and hence systemic importance.
• For dollar-asset markets, Miran’s linkage of stablecoins to increased demand for Treasurys suggests that flows tied to these vehicles may influence borrowing costs, yield curves and thus broader financial conditions.
• For monetary-policy watchers, the idea that stablecoins could materially lower r* adds another structural factor shaping how the Fed thinks about future interest-rate setting, policy ease/tightening and the risks of the ZLB.
• For crypto investors and payment-rail strategists, the remarks underscore that regulatory clarity, reserve-backing transparency and institutional integration are now key hurdles — and opportunities — for stablecoin development.

Bottom Line

Governor Miran’s message: stablecoins have arrived, they are scaling, and central banks can no longer treat them as trivial. 

Their growth has implications for asset-markets, the banking system, global payments, and – critically – the neutral policy rate the Fed uses as an invisible benchmark. 

Until now, stablecoins may have been discussed only in crypto-circles; Miran’s remarks elevate them firmly into the core of central-banking policy debates.

Also read: Stablecoins to Reshape Post Trade Markets Within Five Years:Citi Report

As he put it, “The innovation of public blockchains means that stablecoins can trade freely on rails that anyone in the world can use… Stablecoins may well lead the way … facilitating dollar holdings and payments domestically and abroad.”

Still, Miran emphasised caution. He acknowledged the forecasts might not pan out, referenced yield- and model-risk, and underscored that many of the effects remain speculative. He concluded that because “monetary policy must be forward looking”, now is the time for his colleagues at the Fed to explore the consequences of what he described as a “multitrillion-dollar elephant in the room.”