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Powell Urges Banks to Embrace Crypto, Boosting Market Optimism

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

1min read

Federal Reserve Chair Jerome Powell has advocated for banks to support lawful cryptocurrency customers, provided they effectively manage the associated risks. In a speech following the Federal Open Market Committee (FOMC) meeting, Powell stated that banks are free to engage in crypto activities, but the threshold has been higher due to their novelty. Despite this cautious approach, Powell emphasized that the Fed remains open to innovation in financial markets.

Powell 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. He acknowledged the industry's regulatory challenges and said that a greater regulatory apparatus would be helpful. Although Powell did not endorse crypto, his brief mention led to optimism in the market, causing many assets to rally after the day's slump.

Bitcoin (BTC) fell 1.5% to $101,417.24 after the FOMC revealed no interest rate cuts this month, potentially postponing further cuts until June. However, during Powell's speech, especially after the mention of crypto, the BTC price rebounded 3.3% to touch $104,774.44. Based on CryptoSlate data, the flagship crypto was trading at $103,740 as of press time.

Powell's speech 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 did not mention "Operation Chokepoint 2.0" but cited crypto-related businesses losing access to banking services without reasoning, calling such efforts "unacceptable." Operation Chokepoint 2.0 is an alleged effort by former President Joe Biden's administration to hinder the crypto industry's growth in the US by making it difficult to access banking services.

Hill also 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 the alleged cases 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.

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