Fed Confirms Banking Support Policy for Crypto

In the context of traditional banks facing increasing pressure from strict regulations and compliance risks, Federal Reserve Chairman Jerome Powell affirmed that financial institutions can fully serve customers related to cryptocurrencies. His recent statement before Congress clarified the Fed’s stance and opened up a new direction to ensure equal access for all industries, including the crypto sector. Facing the Issue of ‘Debanking’ and Compliance Risk During his responses to questions from the House Financial Services Committee, Powell mentioned the phenomenon of ‘debanking’ - the situation where banks reduce or refuse to provide services to businesses operating in the cryptocurrency field due to concerns about compliance with anti-money laundering regulations. Powell acknowledged that there are reports showing banks trying to avoid contact with crypto products, but he asserted that the Fed has no intention of restricting serving customers from this sector. According to him, many banks may be overly cautious due to pressure from strict regulations, but this does not mean that financial institutions are not allowed or unable to provide services to crypto businesses. The Fed is reviewing internal policies to ensure that all industries, including crypto, have fair and transparent access to banking services. Market Reaction and Views on Monetary Policy Alongside issues related to cryptocurrencies, Powell also touched on the current economic context, especially regarding inflation and monetary policy. Although inflation has shown signs of cooling down, current prices still exceed the Fed’s target. This means that, at the moment, there is no intention to immediately cut interest rates. Powell’s statements have sparked reactions from the market, as traders adjust their expectations for interest rate cuts in 2025. It is noteworthy that, a few hours before Powell’s testimony, President Donald Trump also spoke out on monetary policy, calling for interest rate cuts combined with tariff measures. However, Powell cleverly avoided political comments, emphasizing that economic decisions need to be based on data and facts rather than external pressures. The Future of Stablecoins and Central Bank Digital Currencies (CBDCs) Issued by (Central Banks) In addition to clarifying the standpoint on “debanking,” Powell also extends the discussion to the future of stablecoins and digital currencies issued by (central banks). He believes that, in the context of an evolving financial system, stablecoins could play a significant role if managed tightly. However, to protect consumers and ensure the stability of the financial system, there needs to be a clear and strict legal regulatory framework. For CBDCs or so-called “digital dollar”, Powell affirmed that the Fed will not proceed with any digital currency issuance project without approval from Congress. This shows the Fed’s desire to maintain a balance between exploiting the potential of digital technology and ensuring transparency and stability in national monetary policy. Conclusion: A New Direction for the Traditional Banking Industry Jerome Powell’s statement has sent a clear message that traditional banks should not automatically exclude businesses operating in the cryptocurrency field. The Fed’s review of internal policies related to ‘debanking’ promises to create a fair business environment where financial institutions can confidently serve customers related to crypto if they can effectively manage risks. In the context of increasingly developing digital technology and the global financial trend shifting, the Fed’s decisions not only affect the traditional banking sector but also open up opportunities for innovation in the cryptocurrency field. As regulations are clarified and the regulatory environment becomes friendlier, crypto businesses can continue to grow, contributing to the diversification of the global financial system. Through that, Powell’s remarks demonstrate the flexibility and long-term vision of the Fed in adjusting policies to accommodate market volatility, while safeguarding the interests of both consumers and businesses in the digital age.