Fed’s Powell says banks can provide crypto services, with caveats – Ledger Insights

During a press conference after announcing unchanged interest rates, Federal Reserve Chair Jerome Powell touched on the topic of cryptocurrencies. He said that banks can provide cryptocurrency services to customers, so long as it’s done in a safe and sound manner.

He added, “we’re not against innovation, and we certainly don’t want to take actions that would cause banks to terminate customers who are perfectly legal just because of excess risk aversion maybe related to regulation and supervision.”

Following a court order, the Federal Deposit Insurance Corporation (FDIC) recently published letters which highlighted the scrutiny banks received when looking to provide cryptocurrency services to clients. In many cases they were told to pause and never given the go ahead.

Crypto exchange Coinbase initiated the legal case in order to find evidence of the debanking of the crypto community, which the letters did not definitively demonstrate. However, the incoming acting Chairman of the FDIC has acknowledged debanking. And a Congressional committee has opened an investigation into the topic this week. This is the same committee that looked into Operation Choke Point under the Obama administration, in which disfavored industries struggled with banking relationships.

Chair Powell also mentioned that banks are already providing crypto services to clients. We previously reported that banks enabled clients to have exposure to the tune of $200 billion in 2023, a year when the cryptocurrency markets were depressed.

Chair Powell comments on crypto

Below is the full quote from Chair Powell:

So our role with crypto really is to look at the banks and we think banks are perfectly able to serve crypto customers as long as they understand and can manage the risks and it’s safe and sound, many of our — a good number of our banks that we regulate and supervise do that.

The threshold has been a little higher for banks engaging in crypto activities, and that’s because they’re so new and we don’t want to make the mistake — if you’re making a choice to conduct that activity inside a bank which is inside the Federal safety net, with deposit insurance, then you want to be pretty sure that it’s a safe and sound activity. So, we’re not against innovation, and we certainly don’t want to take actions that would cause banks to terminate customers who are perfectly legal just because of excess risk aversion maybe related to regulation and supervision.

Asked about households, he responded:

That’s not really our bailiwick. You want people to be knowledgeable about the financial engagements that they have. And that’s why we have the securities laws that we have. It’s why, if you read a mutual fund prospectus or individual stock prospectus, you want households to have the chance to understand the risk that they’re taking. And I do think it would be helpful if there were a greater regulatory apparatus around crypto, and I think that’s something Congress was working on quite a lot. We’ve actually spent a lot of time with members of Congress working together with them on various things and I think that would be a very constructive thing for Congress to do.