Federal Reserve Vice Chair for Supervision Michelle Bowman told lawmakers: “The financial system continues to adapt to technological advances, including the rapid evolution of artificial intelligence capabilities and the risks and benefits of its use.” She warned that AI advances have accelerated the discovery of cyber vulnerabilities across critical infrastructure, including banking systems.
The hearing brought together Bowman, Office of the Comptroller of the Currency Comptroller Jonathan Gould, National Credit Union Administration Chairman Kyle Hauptman and Federal Deposit Insurance Corporation Chairman Travis Hill.
How the GENIUS Act Is Shaping Stablecoin Payments Infrastructure
The strongest area of alignment involved the GENIUS Act and supervisory frameworks for payment stablecoins.
Gould said the OCC is “working to respond to comments on our GENIUS Act proposal and finalize it.” He argued the legislation would deliver consumer safeguards comparable to earlier banking reforms. “The GENIUS Act and our rule will help ensure appropriate consumer protections for stablecoin users,” he said.
Hauptman framed stablecoins as payments infrastructure rather than a crypto asset discussion.
“Stablecoins can make payments faster, cheaper, and more inclusive,” he told lawmakers. Widespread adoption could eliminate the wait of multiple business days for payments to settle. “Every day is a business day with stablecoins,” he said.
Hauptman also highlighted the international implications of dollar-denominated stablecoins. He argued the technology could reinforce the role of the U.S. dollar in global commerce. More than 80% of dollar stablecoin activity occurs outside the United States, he said.
At the FDIC, Hill called GENIUS Act implementation “a top priority.” He outlined proposals covering application requirements, reserve assets, redemption standards and compliance obligations for stablecoin issuers.
Bowman told lawmakers the Federal Reserve is developing stablecoin issuer regulations as directed by Congress.
How AI Is Creating New Cybersecurity Risks for Banks
AI emerged as a major theme at the hearing. Witnesses discussed it less as a productivity tool and more as a source of risk.
Bowman offered the clearest warning. Advances in frontier AI models have “dramatically accelerated the identification of cyber vulnerabilities across critical infrastructure, including the banking system,” per her written testimony. AI may strengthen defenses. But it also opens new avenues for cyberattacks.
How Congress Is Pushing Regulators to Address AI Fraud
Rep. Bill Foster, D-Ill., warned of “a wave of fraud driven by artificial intelligence and deep fakes” confronting banks and credit unions. He argued regulators must stay agile and well-resourced to address those threats.
Foster also pointed to risks from faster-moving financial systems. “Consumers and markets are moving faster than ever with improved access to information, 24-hour banking, and the reduced friction of modern payment systems,” he said. He noted that criminals still use “older banking tools such as paper checks for illicit purposes.”
The comments highlighted a core challenge. Modernizing payments reduces friction for consumers and businesses. But it also reduces the time available to detect and stop fraud.
Gould said the OCC recently revised model risk management guidance with other banking agencies “to avoid impeding banks’ use of AI.” He said regulators are seeking additional feedback on where further guidance may be needed.
Rather than proposing new regulatory structures, witnesses generally favored adapting existing risk management frameworks to accommodate AI deployment.
Why Bank Examiners Are Shifting Focus From Process to Material Financial Risk
Beyond technology, the hearing focused heavily on how regulators conduct examinations and assess risk.
Bowman said a Federal Reserve review found that many supervisory findings tied to procedural or documentation issues rather than actual threats to safety and soundness.
Hill echoed that theme, describing FDIC efforts to reform supervision around “material financial risks rather than process-oriented, check-the-box requirements.” He said the agency is reviewing existing supervisory findings and redefining standards such as “unsafe or unsound” practices.
Gould said the OCC is “returning to risk-based supervision rooted in law and emphasizing examiner judgment, not arbitrary checklists.”
Witnesses also highlighted revisions to the CAMELS rating framework, capital requirements and community bank leverage ratio rules. All aim to better align regulation with actual risk profiles.
Key Exchanges: AML Standards, Crypto and Fed Payment Access
Rep. Gregory Meeks, D-N.Y., pressed Gould on chartering and anti-money laundering standards. He asked whether an applicant could obtain an OCC charter without demonstrating adequate BSA/AML compliance. Gould did not answer directly. He said the OCC’s chartering guidelines are “established by statute” and “detailed,” adding: “It’s not as simple as a yes and no.” When Meeks continued pressing, Gould said he would be “doing a disservice to the members of the committee” if he treated the question as that simple.
Rep. Stephen Lynch, D-Mass., questioned Bowman on crypto access to the banking system. Lynch raised concern about the convergence of traditional banking and crypto. He said banking has long relied on “safeguards and guardrails” while crypto remains a speculative asset class. He asked whether regulators were scrutinizing Kraken, which recently received limited Federal Reserve payment-system access.
Bowman said the Federal Reserve uses “a tiered approach” for approving payment system access. The Kansas City Fed approved Kraken’s access for a “limited purpose” and a “limited period of time.” The 12-month period lapses early next year. She said the Fed plans to use the arrangement to study how similar entities might use limited payment-system access.
The hearing made clear that the next phase of prudential regulation will be shaped as much by digital infrastructure as by traditional banking metrics. Stablecoin reserve frameworks, AI governance, cyber resilience and fraud controls dominated the discussion — reflecting how rapidly the regulatory agenda is evolving.
