- Federal Reserve Chair Jerome Powell says the crypto industry is becoming more mainstream, and expects banks to increase their involvement.
- The Trump administration’s support for digital assets has led banking regulators to ease their approach towards crypto.
- The Federal Reserve recently removed several crypto-related advisories and said reputational risk should not be a factor in bank supervision.
- Lawmakers, including Senator Lummis and Representative Steil, questioned the recent regulatory reversals and sought clarification on the reasons behind the changes.
- Powell pointed to improvements in the crypto sector, highlighting the industry’s growth, maturity, and progress on stablecoin regulations.
Jerome Powell, Chair of the Federal Reserve, stated this week that the crypto sector is becoming more mainstream. He made these remarks during recent House and Senate committee hearings and added that he expects banks to become more active in the sector.
Regulators have recently adjusted their approach to the industry. In April, the Federal Reserve withdrew four advisories related to crypto and this week announced that reputational risk would no longer be used as a factor in supervising banks. Some Republican lawmakers previously criticized banking regulators for applying reputational risk as a way to restrict crypto companies from accessing banking services.
Senator Cynthia Lummis asked about these policy changes, noting that earlier guidance called issuing tokens on open or decentralized networks likely inconsistent with safe banking practices. She pointed out that the Federal Reserve has not yet withdrawn a related advisory under section 9(13), which includes similar language. The Senator referenced the new Genius Act, which allows banks to use distributed ledgers—digital systems for recording transactions.
Powell answered that many of the withdrawn advisories were introduced during times of instability and fraud in the crypto industry. He said, “I think what’s happening is the industry is maturing, our understanding of it is improving, and in a sense, it’s becoming much more mainstream.” Powell confirmed that banks may choose their customers and take on activities, provided these are done safely and soundly. He added that section 9(13) is broader than crypto, and he would follow up with more details.
Representative Steil raised the topic of removing reputational risk considerations. He asked what new factors led to this change. Powell replied, “There had been reports of debanking for a couple of years, which really came into focus in 2024. The Federal Reserve Board came to the view that this was a serious problem that we need to address.” When asked about the impact of withdrawing crypto statements, Powell said he expects, “a very significant change in the tone,” which he attributes to the evolving crypto sector.
Powell also commented that progress on a legal framework for stablecoins, which are cryptocurrencies designed to maintain a stable value, is positive.
Recent shifts in policy come as lawmakers and industry leaders continue to push for greater acceptance of digital assets within regulated financial systems. The ongoing discussions highlight the changing landscape for crypto companies and the evolving perspectives of U.S. banking authorities.
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