Fed Chair Jerome Powell Expresses Concern Over Crypto Debanking, Supports Stablecoin Regulation
Federal Reserve Chairman Jerome Powell has acknowledged growing concerns about the debanking of crypto firms and other legal business sectors, committing to addressing the issue during a Senate Banking Committee hearing on Tuesday. His remarks signal a potential shift in the Fed’s supervisory policies, offering a glimmer of hope for the U.S. crypto industry.
Key Takeaways:
- Powell pledged to review and address the debanking trend affecting digital asset businesses.
- He acknowledged that stablecoins may play a significant role in the financial system and supports establishing regulatory frameworks for them.
- Powell reaffirmed his position against launching a U.S. central bank digital currency (CBDC).
- The Federal Reserve sees no urgency in further interest rate cuts, maintaining a cautious stance on monetary policy.
- Bitcoin (BTC) continued to face downward pressure, declining 2.35% to $95,140 on Tuesday.
Powell: “Struck” by Increasing Cases of Crypto Debanking
When questioned by lawmakers about the debanking crisis impacting crypto businesses, Powell admitted he was also troubled by the growing number of reports. He attributed part of the issue to heightened risk aversion among banks due to stringent anti-money laundering (AML) and compliance regulations.
“One theory is that banks are just very risk-averse when it comes to money-laundering rules and aggressive supervision, making them reluctant to serve customers that may stretch their compliance demands,” Powell stated.
He assured the committee that the Federal Reserve is taking a fresh look at its internal supervision policies to ensure that legally operating businesses, including those in digital assets, are not unfairly excluded from banking services.
This issue has been a major point of contention among Republican lawmakers and newly appointed financial watchdogs under former President Donald Trump, who argue that prior regulatory policies discouraged banks from servicing crypto firms. Powell even confirmed that the Fed is removing an internal policy that directed greater scrutiny toward banks that engaged in controversial activities or speech—an issue raised by pro-crypto Senator Cynthia Lummis.
Stablecoins Could Have a “Big Future” – Powell Supports Regulation
While digital asset regulation wasn’t the central theme of Powell’s testimony, stablecoins were a major topic of discussion. Powell acknowledged the potential for stablecoins to become an integral part of consumer and business transactions, emphasizing the need for proper oversight.
“Stablecoins may have a big future with consumers and businesses. We can’t predict that with certainty today, but what is clear is the need for a safe and sound regulatory framework that protects consumers and savers,” he explained.
This aligns with broader regulatory efforts to introduce comprehensive stablecoin legislation, ensuring these digital assets are issued and managed under strict compliance standards.
Powell Confirms: No Plans for a U.S. CBDC
Powell also provided a definitive stance on the long-debated central bank digital currency (CBDC) issue. When asked if he would commit to never launching a U.S. CBDC, Powell simply responded, “Yes.”
This statement marks a decisive rejection of a digital dollar, a concept that has been explored by central banks in China and Europe. The idea has faced strong opposition from U.S. lawmakers, particularly after Trump’s return to office, with critics arguing that a CBDC could infringe on financial privacy and economic freedom.
Fed’s Monetary Policy: No Rush for Rate Cuts
Beyond crypto-related discussions, Powell reiterated the Federal Reserve’s cautious approach to interest rate cuts, stating that the economy remains in a strong position and there is no urgency to ease policy further.
“We’re in a pretty good place with this economy. We want to make more progress on inflation, and we think our policy rate is in a good place. We don’t see any reason to rush into reducing it further,” Powell said.
The Fed had already cut rates three times by a total of 100 basis points in late 2024. However, robust economic data and persistent inflation led policymakers to halt further rate reductions.
Bitcoin Reacts to Fed’s Stance, Falls Below $96K
Powell’s hawkish tone on monetary policy, combined with ongoing concerns about regulatory uncertainty, has put pressure on crypto markets.
Bitcoin (BTC) fell 2.35% on Tuesday to $95,140, extending its recent downtrend. The broader crypto market also struggled, with major altcoins experiencing similar declines.
What’s Next?
Powell is set to testify before the U.S. House of Representatives on Wednesday, where additional discussions on crypto regulation, banking access, and monetary policy are expected.
Meanwhile, the House Financial Services Committee was scheduled to hold a crypto-focused hearing later on Tuesday, further underscoring the growing importance of digital assets in regulatory and legislative discussions.
As regulatory clarity unfolds, the crypto industry will closely watch how the Federal Reserve, Congress, and financial watchdogs shape the future of digital asset banking and stablecoin regulations in the United States.
