Fed Clarifies Crypto Banking Stance, Bitcoin Surges 3%

The Federal Reserve has clarified its stance on banks serving cryptocurrency customers, stating that they can do so as long as they effectively manage the associated risks. This announcement comes amid concerns of crypto debanking and industry crises like the FTX collapse. Federal Reserve Chairman Jerome Powell emphasized the need for a higher threshold of risk management for banks engaging in crypto activities due to their novelty, while also asserting that the central bank supports innovation. Meanwhile, legislative and legal actions are being taken to address the ongoing debate around banks' services to crypto firms.

Bitcoin (BTC) has seen a 3% increase in price following the Federal Reserve's announcement, reflecting a positive sentiment in the cryptocurrency market. This move comes after a period of volatility and uncertainty, with investors and institutions alike welcoming the clarity provided by the central bank's stance on crypto banking services.

The Federal Reserve's advocacy for a regulatory framework to benefit the cryptocurrency industry has been well-received by market participants. The call for Congress to consider a larger regulatory framework underscores the necessity for coherent policy that can adapt to the rapid evolution of the crypto market. As the industry matures, this regulatory clarity could play a crucial role in its stability and growth.

In other news, the U.S. Commerce Secretary nominee, Howard Lutnick, was questioned during a Senate Commerce Committee hearing about his firm Cantor Fitzgerald's custodial role for Tether amidst scrutiny over the crypto token's reserves and alleged ties to illicit finance. Lutnick defended the stability of USDT and its backing, while addressing ongoing regulatory challenges and fines related to the token.

Czech National Bank Governor Aleš Michl plans to propose a strategy to allocate up to 5% of the bank's €140 billion reserves to Bitcoin. This initiative, aimed at diversifying the CNB's reserve assets, could position the CNB as the first central bank to hold Bitcoin. Michl cited the asset's potential for high returns despite its volatility and the increasing interest from major asset managers and regulatory developments in the U.S.

Gary Gensler has returned to the MIT Sloan School of Management as Professor of the Practice, where he will focus his teaching and research on artificial intelligence, finance, financial technology, and public policy. In addition to his academic role, Gensler will co-direct the FinTechAI@CSAIL initiative, partnering with Professor Andrew W. Lo to foster collaboration between member companies and MIT researchers