Powell: Banks Can Serve Crypto Clients, Congress Should Lead Regulation

Federal Reserve Chairman Jerome Powell has recently addressed the topic of cryptocurrency, stating that banks are free to serve crypto clients as long as they effectively manage the associated risks. During a press conference following the Federal Open Market Committee (FOMC) meeting, Powell emphasized that the Fed is not opposed to innovation in financial markets and does not intend to terminate legal customers of crypto firms.

Powell acknowledged the regulatory challenges faced by the crypto industry and expressed support for a greater regulatory apparatus around crypto. He believes that Congress should take the lead in this regard, as the Fed has been working closely with members of Congress on various issues. Powell's comments come amid concerns about the potential risks posed by stablecoins to financial stability, as highlighted in a report by the Financial Services Oversight Council.

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

Powell's stance on crypto is a departure from the alleged efforts by the Biden administration to hinder the industry's growth in the US by making it difficult for crypto firms to access banking services, a practice known as "Operation Chokepoint 2.0." The Federal Deposit Insurance Corporation (FDIC) interim Chair Travis Hill recently acknowledged the agency's role in "debanking" crypto firms and vowed to change the FDIC's course to prevent future cases.

The House Committee on Oversight and Government Reform is also investigating allegations of crypto firms being debanked. On Jan. 24, the Committee sent a formal letter to several entities related to crypto, requesting evidence and accounts of such cases.