Powell: Banks Can Serve Crypto Clients, Calls for Tighter Regulation

The Federal Reserve, led by Chair Jerome Powell, has reiterated its stance on cryptocurrency, stating that banks can serve crypto clients provided they manage the associated risks effectively. Powell made these remarks during a press conference following the Federal Open Market Committee (FOMC) meeting on January 29, 2025.

Powell acknowledged the potential risks associated with crypto activities, noting that the threshold for banks engaging in such activities has been higher due to their novelty. However, he emphasized that the Fed remains open to innovation in financial markets and is not interested in terminating legal customers. Powell also acknowledged the regulatory challenges faced by the crypto industry and called for a greater regulatory apparatus to address these issues.

The Fed chair's comments came amidst allegations that crypto firms are facing difficulties accessing banking services in the US. Powell swiftly addressed these allegations, stating that the Fed's role is to examine banks and that the industry's regulatory challenges are well-known. He also acknowledged the need for a more robust regulatory framework to support the growth of the crypto industry.

The crypto market reacted positively to Powell's remarks, with Bitcoin (BTC) rebounding 3.3% to touch $104,774.44 after initially falling 1.5% to $101,417.24 following the FOMC's announcement of no interest rate cuts this month. As of press time, BTC was trading at $103,740.

Powell's comments also come in the wake of the Federal Deposit Insurance Corporation (FDIC) interim Chair Travis Hill's acknowledgment of the agency's role in "debanking" crypto firms. Hill had previously acknowledged the agency's role in "debanking" crypto firms and vowed to change the FDIC's course to prevent future cases in which banks sideline crypto firms. The House Committee on Oversight and Government Reform is also probing the alleged cases of crypto firms being debanked.

The crypto market's reaction to Powell's remarks highlights the industry's sensitivity to regulatory signals. As the crypto market continues to mature, the dialogue between regulators and financial institutions will play a crucial role in shaping the future of crypto banking and fostering a secure environment for digital asset operations.