Crypto Debanking Worries Fed Chair Powell – Will Regulators Ease Pressure?

• Powell expresses concern over crypto debanking and signals a possible regulatory shift.
• Fed remains skeptical of stablecoins and firmly opposes issuing a U.S. CBDC.

Federal Reserve Chairman Jerome Powell has voiced concerns over the increasing reports of ‘debanking’ in the crypto industry, stating that he is troubled by the trend and is taking steps to address it. During a Senate Banking Committee hearing, Powell acknowledged that banks are increasingly cutting ties with crypto-related businesses due to risk aversion and stringent anti-money laundering regulations.

A recent CNF post highlighted that Powell remains cautious on crypto, stating that the Fed cannot own Bitcoin unless laws change. However, Powell assured lawmakers that the Fed is revisiting its internal supervision policies to prevent excessive de-risking.

As reported in an FT updates, he stated in a routine testimony before the Senate Banking Committee:

I am troubled by the quantity of these reports, and it is fair to take a fresh look at the practice.

This move could signal a shift in how financial institutions handle crypto clients, potentially offering relief for the industry. Responding to earlier questions from senators on regulatory supervision, Powell noted:

What happened was, I would say, a lot of focus on process, and not enough on bread and butter banking—credit risk, liquidity risk, interest rate risk, things like that.

Regulatory Scrutiny and Stablecoin Developments

The discussion also touched on stablecoins and central bank digital currencies (CBDCs). Powell reiterated that stablecoins could play a significant role in the future of finance, provided they operate within a clear regulatory framework ensuring safety and consumer protection.

However, Powell shut down speculation about the launch of a U.S. CBDC, responding with a firm “yes” when asked whether he would commit to never issuing a digital dollar. His stance contrasts sharply with nations like China and the EU, which are actively advancing their own digital currency initiatives.

As Powell emphasized:

Our [job]is to try to react to [tariffs]in a thoughtful, sensible way and make monetary policy so that we can achieve our mandate.

Bitcoin Market Update

At the time of writing, this regulatory uncertainty has weighed on crypto prices, with Bitcoin (BTC) slipping 2.58% to reach the current price at $95,798 in trading. See BTC price chart below. The uncertainty surrounding monetary policy and regulatory headwinds continues to create volatility in the crypto market, leaving investors cautious about the short-term outlook.