On June 24, Jerome Powell, the Chair of the United States Federal Reserve, addressed Congress regarding the interaction between banks and cryptocurrency firms. He expressed that banks are permitted to engage with crypto technology and companies, provided they follow existing regulations that ensure customer protection and economic stability.
During his testimony, part of the Fed’s semiannual monetary report to Congress, Powell asserted, “Banks get to decide who their customers are, that’s not our decision.” He reiterated the idea that banks could conduct crypto-related activities, as long as they maintain safety and soundness.
Additionally, Powell noted a noticeable shift in the attitudes of financial institutions towards digital assets. He called this change a result of “evolving thinking and the evolving status of the crypto industry.” His remarks came shortly after the Federal Reserve announced the removal of the term “reputational risk” from its bank supervision framework, which may broaden the access of crypto firms to essential financial services.
Some lawmakers, including senator Cynthia Lummis, have suggested that stringent reputational risk policies have previously restricted crypto firms from obtaining necessary banking services.
In terms of legislative support for cryptocurrency, Powell expressed positive sentiments about current bills making their way through the U.S. Congress, stating, “I think it’s a great thing that the bills are moving.” He emphasised the need for a regulatory framework for stablecoins, calling it essential to the financial ecosystem.
One significant piece of legislation, the GENIUS Act, aimed at regulating stablecoins in the U.S., recently passed the Senate with bipartisan support. Should it progress through Congress, it could potentially be signed into law by President Donald Trump by September.
Meanwhile, another proposed bill, the CLARITY Act, is under review in the House, which seeks to delineate the responsibilities of various regulatory bodies, such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), in relation to overseeing digital asset markets.
In summary, Powell’s remarks suggest a more open regulatory environment for banks and cryptocurrency, which could lead to greater integration of digital assets in the traditional financial system if recent legislative efforts succeed.
