Fed Governor Miran: Stablecoin Adoption Could Lower Interest Rates - Market Impact Analysis

This analysis is based on the Reuters report [1] published on November 7, 2025, which reported Federal Reserve Governor Stephen Miran’s statement that widespread stablecoin adoption could require the Federal Reserve to maintain lower short-term interest rates than otherwise necessary. Miran explained that stablecoins increase the net supply of loanable funds and boost demand for U.S. Treasury bills, which could lower the economy’s neutral rate (R-star) [1].

The equity markets responded positively but modestly to Miran’s accommodative policy implications:

• S&P 500: +0.23% to 6,711.67 [0]
• NASDAQ Composite: +0.17% to 22,932.64 [0]
• Dow Jones: +0.18% to 46,880.80 [0]
• Russell 2000: +0.69% to 2,424.48 [0]

Circle Internet Group (CRCL) significantly outperformed the broader market, gaining +3.19% to $103.20, suggesting investors viewed Miran’s comments as validation for the stablecoin industry’s regulatory acceptance and growth potential [0].

The stablecoin ecosystem has reached substantial scale, supporting Miran’s thesis about macroeconomic impact:

• Total stablecoin market cap: ~$305 billion as of 2025 [2]
• USDC market cap: ~$74 billion (72% growth since January 2025) [4]
• USDT market cap: ~$166 billion with $98.5 billion in U.S. Treasury bills [3]
• Combined USDT/USDC trading volume: $18.7 trillion in 2025 [2]

Tether alone holds approximately $98.5 billion in U.S. Treasury bills, representing roughly 1.5-1.6% of the total U.S. T-bill market (~$6.3 trillion) [3]. This concentration demonstrates how stablecoin growth could materially impact Treasury demand and, consequently, interest rate dynamics.

Miran’s statement centers on the concept of the neutral rate (R-star), which represents the short-term interest rate that neither stimulates nor restricts the economy [1]. The mechanism works as follows:

1. Loanable Funds Supply
   : Stablecoins increase the net supply of loanable funds in the economy
2. Treasury Demand
   : Stablecoin issuers purchase U.S. Treasury bills for reserve backing
3. R-Star Reduction
   : Increased loanable funds supply and Treasury demand lower the neutral rate
4. Policy Adjustment
   : The Fed would need to maintain lower policy rates to avoid being contractionary

However, current stablecoin penetration remains relatively modest compared to traditional monetary aggregates, with USD-denominated stablecoins representing less than 2% of U.S. M1 money supply (~$265 billion vs. $18.9 trillion) [2].

The statement comes amid significant regulatory developments that could accelerate the effects Miran described:

• The GENIUS Act was passed in July 2025, mandating stablecoin issuers publish monthly reserve composition reports [3]
• This regulatory clarity may accelerate institutional adoption and Treasury demand
• However, stablecoin adoption remains concentrated in crypto markets rather than mainstream payments, with only ~30,000 merchants globally accepting stablecoins vs. 150+ million accepting traditional cards [2]

Research suggests the relationship between stablecoin growth and traditional monetary policy transmission remains complex. Studies indicate stablecoin lending rates are primarily driven by crypto ecosystem factors rather than Fed policy [6], creating potential disconnects between intended and actual monetary policy effects.

The concentration of Treasury holdings among major stablecoin issuers creates systemic considerations:

• Tether’s $98.5 billion in Treasury holdings represents significant market concentration [3]
• Any regulatory issues with major stablecoin issuers could impact Treasury market stability
• The Federal Reserve’s own research notes stablecoins could reshape credit intermediation patterns [7]

The magnitude and timeline of stablecoin impact on R-star remain unclear, with no specific estimates provided for how much the neutral rate might decline at various adoption levels [1].

Different jurisdictions pursue varying stablecoin regulatory approaches, with Europe’s MiCA regulation potentially affecting global stablecoin flows and Treasury demand patterns.

Stablecoin growth could affect traditional bank deposit bases and funding costs, potentially reshaping the financial intermediation landscape [7].

The regulatory clarity from the GENIUS Act and Federal Reserve recognition could accelerate institutional stablecoin usage and integration with traditional financial systems.

Increased stablecoin demand for Treasury bills could improve market liquidity and potentially reduce borrowing costs for the government.

The Federal Reserve’s acknowledgment of digital currency impacts opens opportunities for more sophisticated monetary policy frameworks that incorporate digital asset dynamics.

• Stablecoin market has reached meaningful scale (~$305 billion) but remains small relative to traditional monetary aggregates
• Major issuers hold significant Treasury positions that could influence interest rate dynamics
• Regulatory framework is evolving toward greater transparency and oversight

• Widespread stablecoin adoption could lower the neutral rate, requiring accommodative monetary policy stance
• The Federal Reserve is beginning to incorporate digital currency effects into policy considerations
• Timeline and magnitude of effects remain uncertain and depend on adoption patterns

• Concentration risk exists with major stablecoin issuers holding significant Treasury positions
• Current adoption is concentrated in crypto markets rather than mainstream payments
• International regulatory coordination will be crucial for managing cross-border impacts

1. Stablecoin growth trajectory and Treasury holding patterns
2. Federal Reserve researchers’ updated R-star estimates
3. Regulatory developments and cross-border coordination
4. Institutional adoption trends and integration with traditional finance

This analysis provides context for understanding the potential macroeconomic implications of stablecoin growth while highlighting the uncertainties and risks that warrant ongoing monitoring as this market segment evolves.