Fed's Crypto Crossroads: Dovish Leadership vs. Regulatory Risks

Kevin Hassett, the White House National Economic Council director, is emerging as the leading candidate to succeed Jerome Powell as Federal Reserve chair, with prediction markets and political observers increasingly aligning behind his nomination. Traders on the Kalshi exchange now assign a 54% probability to his selection, a surge driven by reports of his alignment with President Donald Trump's economic agenda. Hassett's dovish stance on interest rates, which aligns with Trump's push for faster rate cuts, has positioned him as a key figure in shaping the Fed's next chapter. Analysts note that a Fed under Hassett could prioritize lower borrowing costs, a policy shift that could reverberate through global financial markets, particularly in crypto and risk assets.

Hassett's credentials as a crypto-friendly policymaker further amplify speculation about his potential impact. He owns over $1 million in Coinbase stock and has served on the exchange's advisory council, while also leading the White House's digital asset working group according to reports. These ties have drawn attention from crypto investors, who see his potential leadership as a signal of regulatory openness. Juan Leon, a strategist at Bitwise, argues that Hassett's dovish policies and pro-crypto background could catalyze institutional adoption and clearer regulatory frameworks for digital assets. However, critics caution that his financial interests in the sector could raise conflicts of interest, particularly as the Fed holds significant influence over crypto regulations and stablecoin oversight.

The Fed's current trajectory under Powell has already seen rate cuts in 2025, but Trump's public frustration with Powell's pace has intensified the search for a successor. Treasury Secretary Scott Bessent, leading the selection process, has narrowed the field to five candidates, with Hassett, Christopher Waller, and Kevin Warsh as top contenders. Trump's preference for a dovish chair is evident in his repeated calls for rate cuts, a stance Hassett has echoed in public remarks. "If I were Fed chair, I'd be cutting rates right now," Hassett told Fox News, emphasizing his alignment with Trump's economic priorities. This dovish approach could keep U.S. interest rates lower for longer, potentially boosting liquidity and supporting risk-on assets like Bitcoin, which historically correlate with accommodative monetary policy.

The implications for the crypto market are twofold. First, lower rates could reduce borrowing costs for crypto projects and DeFi protocols, improving margin conditions and exchange volumes. Second, a Fed chair with direct ties to the industry might prioritize regulatory clarity over stricter oversight, fostering innovation. Kyle Rodda of Capital.com notes that Hassett's appointment could lead to a "more supportive environment for crypto," though market outcomes will depend on data and geopolitical dynamics.

As the selection process nears its conclusion, investors are closely monitoring Bessent's timeline for an announcement, with many expecting a decision before Christmas 2025. While Hassett's prospects remain strong, the final choice will shape not only U.S. monetary policy but also the Fed's stance on emerging technologies. For now, the convergence of dovish economics and crypto-friendly credentials has made Hassett a pivotal figure in a market bracing for transformation.