Powell Addresses Crypto Risks: Banks Can Serve Customers Safely

Federal Reserve Chair Jerome Powell recently addressed concerns raised in the Financial Stability Oversight Council’s annual report, particularly focusing on the risks associated with cryptocurrencies. Powell was asked about the potential impact of cryptocurrency speculation on individuals' financial well-being and the broader financial system.

Powell emphasized that the Federal Reserve's primary role is to oversee how banks interact with cryptocurrencies. He noted that banks can serve cryptocurrency customers as long as they understand and manage the associated risks, ensuring their operations remain safe and sound. Many banks under the Federal Reserve's supervision are already engaging with crypto in a secure manner. However, Powell pointed out that banks face higher thresholds when it comes to crypto activities due to the relatively new nature of digital assets.

“Banks are perfectly able to serve crypto customers as long as they understand and can manage the risks. And it’s safe and sound, as a good number of our banks that we regulate and supervise do that. The threshold has been a little higher for banks engaging in crypto activities. And that’s because they’re so new,” he explained.

He explained that if a bank decides to offer crypto services, it must ensure the activity is fully safe, as it operates under the federal safety net, including deposit insurance. The Fed’s cautious approach aims to prevent risks to the broader financial system while supporting innovation. Powell reiterated that the Fed is not opposed to cryptocurrency innovation, but it seeks to prevent overly cautious regulations from unduly disrupting legitimate business activities.