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Powell Opens Door for Banks to Enter Crypto, Boosting Market Sentiment

Coin WorldWednesday, Jan 29, 2025 6:02 pm ET

1min read

Federal Reserve Chair Jerome Powell has stated that banks can safely engage in cryptocurrency services, provided they effectively manage the associated risks. During a speech following the Federal Open Market Committee (FOMC) meeting, Powell emphasized that banks are free to serve crypto clients, but the threshold for engagement has been higher due to the novelty of these activities.

Powell acknowledged the regulatory challenges faced by the crypto industry and expressed the need for a greater regulatory apparatus. He also addressed allegations that crypto firms are having difficulties accessing banking services in the US, stating that the Fed is not interested in terminating legal customers. Instead, the Fed's role is to analyze banks and ensure they are managing risks appropriately.

The Fed chair's brief mention of crypto led to optimism in the market, causing many assets to rally after a day's slump. Bitcoin (BTC), for instance, rebounded 3.3% to touch $104,774.44 after Powell's speech, following a 1.5% drop earlier in the day when the FOMC revealed no interest rate cuts this month.

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

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