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Powell: Banks Can Serve Crypto, Backs Regulation

Coin WorldWednesday, Jan 29, 2025 6:02 pm ET
1min read

Federal Reserve Chair Jerome Powell has recently addressed the topic of cryptocurrencies and their relationship with traditional banking institutions. In a press conference following the Federal Open Market Committee (FOMC) meeting on January 29, Powell stated that banks are "perfectly able to serve crypto customers" provided they manage the associated risks effectively. This statement comes as a reassurance to the crypto industry, indicating that the Fed is not opposed to innovation in the financial sector.

Powell acknowledged that there is a higher threshold for banks engaging in crypto activities due to their novelty. However, he emphasized that the Fed is not interested in terminating legal customers and that its role is to analyze banks, not the relationship between banks and crypto firms. Powell also acknowledged the regulatory challenges faced by the crypto industry and expressed support for a greater regulatory apparatus to address these issues.

The Fed chair's comments have been welcomed by the crypto market, with many assets rallying following the announcement. Bitcoin, for instance, rebounded by 3.3% to touch $104,774.44 after Powell's speech, despite initially falling 1.5% to $101,417.24 following the FOMC's decision not to cut interest rates this month.

Powell's remarks also come amidst ongoing discussions about the alleged "Operation Chokepoint 2.0," which some believe is an effort by the Biden administration to hinder the growth of the crypto industry in the US by making it difficult for crypto firms to access banking services. The House Committee on Oversight and Government Reform is currently probing these alleged cases of "debanking."

In a separate development, Powell called on Congress to move forward with establishing a regulatory apparatus for cryptocurrencies. He suggested that a greater regulatory framework would be helpful for both households considering crypto investments and the broader crypto industry. Powell's comments highlight the importance of regulatory clarity in fostering a more stable and secure environment for cryptocurrencies.

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