Fed Won’t Block Banks From Crypto, Powell Signals No Rush for Rate Cuts

• Powell affirms the Fed is not restricting banks from providing services to crypto customers.
• Inflation remains elevated, leading the Fed to maintain its restrictive policy stance.
• Trump pushes for lower interest rates, but Powell maintains decisions will be based on economic data.

Federal Reserve Chair Jerome Powell reaffirmed that financial institutions can serve cryptocurrency clients, pointing to a move toward clearer regulation. 

Testifying before Congress, Powell addressed concerns over “debanking,” where banks cut services to crypto firms because of compliance risks. He acknowledged reports that banks avoid crypto exposure and assured lawmakers that the Fed will review its internal policies to secure fair banking access for all sectors

Fed Confirms Crypto Banking Policy Clarity

When questioned by the House Financial Services Committee, Powell confirmed that the central bank does not discourage financial institutions from handling digital assets. He suggested that banks may act out of excessive caution because of strict anti-money laundering rules but stated that the Fed will reassess its approach.

His comments followed a similar statement from a Senate hearing, where he addressed increasing reports of financial institutions cutting ties with crypto firms. Powell repeated that banks can serve cryptocurrency customers if they control related risks effectively. The remarks mark an important move to ensure that the banking system does not arbitrarily exclude crypto businesses.

Related: Powell Cancels Any CBDC Plans, Instead Trusts FedNow for U.S. Payments

Market Reaction: Powell on Inflation, Rates, and Crypto Policy

Powell also spoke about inflation and monetary policy, stating that while inflation has moderated, it remains above target, meaning the Fed is not considering immediate rate cuts. The statement triggered market reactions, with traders revising their rate cut expectations for 2025.

It is worth mentioning that President Donald Trump had weighed in on monetary policy hours before Powell’s testimony, calling for lower interest rates with proposed tariffs. When asked about Trump’s comments, Powell refrained from political commentary, noting that economic decisions rely on data rather than external pressures.

Regulatory Outlook and Crypto’s Future

Powell’s comments went beyond banking and covered stablecoins and central bank digital currencies (CBDCs). 

Related: Trump Nominates a16z’s Quintenz as CFTC Chief for Crypto Oversight

He noted that stablecoins might assume an important position in the financial system but insisted on a regulatory structure to secure consumer protection. Regarding CBDCs, he told lawmakers that the Fed will not proceed with any digital dollar initiative without Congressional approval.

As the Fed reviews its debanking policies, traditional financial institutions may gain confidence in incorporating digital assets into their services.