During a recent testimony before the Senate Banking Committee, Federal Reserve Chairman Jerome Powell expressed his concerns regarding the growing trend of “debanking” affecting the cryptocurrency industry. Powell acknowledged that the increase in reports related to this phenomenon is troubling and indicated that the Federal Reserve is reviewing its internal supervision policies to address these issues.
In his remarks, Powell commented, “I too, am troubled by the quantity of these reports.” He elaborated that one possible explanation for the debanking trend is that banks are becoming excessively risk-averse due to stringent money-laundering regulations and the fear of aggressive supervision. This environment, he suggested, may be leading banks to avoid serving customers that could trigger compliance complications.
Powell’s sentiments were echoed by several Republican lawmakers, who scrutinized the debanking practices that they believe were exacerbated by the previous administration’s banking regulatory agencies, including the Fed, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.
During the hearing, Powell also acknowledged the contributions of Senator Cynthia Lummis, a known advocate for cryptocurrency, who highlighted the Fed’s policy of increasing supervisory scrutiny on bankers involved in controversial speech or activities. In a significant move, Powell revealed that this particular policy would be removed from the internal manual, signaling a shift in the Fed’s approach to regulation.
Although the hearing was not primarily focused on cryptocurrency oversight, relevant topics such as stablecoins and central bank digital currencies (CBDCs) were discussed. Powell affirmed the Fed’s support for creating regulatory frameworks around stablecoins—digital tokens designed to maintain stable value, typically by being pegged to high-value assets like the U.S. dollar. He stressed the importance of a safe and sound regulatory environment to promote the responsible development of stablecoins, stating, “Stablecoins may have a big future with consumers and businesses. We can’t know that now, but it is important for the development of stablecoins — in a safe and sound manner that protects consumers and savers and all — that there be a regulatory framework.”
On the topic of CBDCs, Powell offered reassurance to the crypto industry when he was directly asked about the potential launch of a U.S. digital dollar. His concise response was a clear “yes” to the question of whether he would agree to never introduce a CBDC, indicating that the possibility of the U.S. matching the digital currency experiments of China and Europe had diminished under recent political changes.
Powell is expected to address the U.S. House of Representatives shortly, and cryptocurrency will remain a central discussion point at a forthcoming hearing with the House Financial Services Committee.
For continued updates on the evolving landscape of cryptocurrency regulations, stay informed by following the discussions and testimonies that shape the future of digital assets.
