Fed Chair Calls for Crypto Regulation, Warns Banks Against ‘Excess Risk Aversion’
“I do think it would be helpful if there were a greater regulatory apparatus around crypto,” the US central bank chair said at the Federal Open Market Committee press conference on Jan. 29. He added that it is something Congress and the Fed have been “working on quite a lot.”
“We’ve actually spent a lot of time, you know, with House Financial Services, working together with them on various things, and I think that would be a very constructive thing for Congress to do,” he said.
The comments came as the Federal Reserve maintained interest rates at 4.25% to 4.5% following last week’s CPI data that showed inflation was not as high as many anticipated.
Don’t Debank Crypto Customers
Powell also said the central bank was “not against innovation” with regard to cryptocurrencies.
Speaking about banking restrictions, he added, “We certainly don’t want to take actions that would cause banks to, you know, terminate customers who are perfectly legal just because of excess risk aversion, maybe related to regulation and supervision.”
Powell’s remarks at the first FOMC meeting under the Trump administration came as concerns about so-called “debanking” efforts have risen to the highest ranks of government.
“Banks are perfectly able to serve crypto customers, as long as they understand and can manage the risks, and it’s safe and sound,” Powell said before adding, “The threshold has been a little higher for banks engaging in crypto activities, and that’s because they’re so new.”
He noted that individual investors needed better protection as the risks may not be fully understood. He also compared crypto to stocks and mutual funds, saying that similar consumer safeguards should apply.
No Disagreements With Trump
The central bank chair has avoided responding directly to comments made or actions taken by Donald Trump in recent weeks. He said there has been “no contact” with the new president, noting that disagreements would undermine the Fed’s credibility.
“We stand ready to take appropriate action to support the smooth transmission of monetary policy, including adjusting the details of our approach for reducing the size of our balance sheet in light of economic and financial developments,” he said.
More economic data is expected this week, with fourth-quarter GDP Growth Annualized advance estimates due on Thursday and December’s Core Personal Consumption Expenditures (PCE) report due on Friday.
Crypto markets were up marginally during the Thursday morning Asian trading session, with Bitcoin leading the pack and reclaiming $105,000.
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