Federal Reserve Chair Jerome Powell has called on U.S. lawmakers to accelerate efforts in establishing clear regulations for the cryptocurrency industry.
Stronger Oversight Needed for Crypto
During the Federal Open Market Committee (FOMC) press conference on January 29, Powell emphasized the importance of a well-defined regulatory framework for digital assets.
“It would be beneficial to have a more robust regulatory structure surrounding crypto,” he stated, noting that the Federal Reserve has been collaborating closely with Congress to address the issue.
Powell highlighted ongoing discussions between the Fed and the House Financial Services Committee, underscoring the need for legislative action.
His remarks followed the Fed’s decision to maintain interest rates between 4.25% and 4.5%, a move influenced by recent inflation data, which came in lower than expected.
Banks Should Avoid Overreacting to Crypto Risks
While advocating for stronger oversight, Powell clarified that the central bank supports financial innovation and does not intend to hinder legitimate crypto-related activities.
“We don’t want to take actions that force banks to sever ties with legitimate customers simply due to excessive risk aversion tied to regulatory concerns,” Powell explained.
His comments come amid increasing fears of “debanking,” where financial institutions distance themselves from crypto businesses due to uncertainty in regulatory guidelines.
Powell reassured that banks are permitted to engage with crypto firms as long as they fully understand and can effectively manage associated risks. However, he acknowledged that the standards for banks dealing with crypto remain higher due to the industry’s evolving nature.
Additionally, he stressed the need for enhanced consumer protections, drawing comparisons between cryptocurrencies and traditional investments like stocks and mutual funds, which have more established investor safeguards.
No Conflict With Trump Administration
Addressing questions about his relationship with President Donald Trump, Powell avoided direct commentary on any potential disagreements. He confirmed there has been no communication with the president since his return to office and reaffirmed the importance of maintaining the Federal Reserve’s independence.
“We are prepared to take necessary actions to ensure the smooth execution of monetary policy, including adjusting our strategy for reducing the balance sheet in response to economic and financial developments,” Powell stated.
Market Response and Economic Outlook
Investors are now awaiting key economic reports later this week, including fourth-quarter GDP growth projections on Thursday and the Core Personal Consumption Expenditures (PCE) report on Friday.
Meanwhile, crypto markets reacted positively to Powell’s remarks, with Bitcoin rebounding above $105,000 during early Thursday trading in Asia.
