Federal Reserve Chairman Expresses Concerns Over Debanking in Crypto Industry
During his recent testimony before the Senate Banking Committee, Federal Reserve Chairman Jerome Powell addressed the growing concerns surrounding the trend of “debanking” that has been impacting the crypto sector. Powell expressed his unease regarding this issue, acknowledging that the Fed is actively revising its internal supervision policies to tackle it more effectively.
“I too, am troubled by the quantity of these reports,” Powell stated, emphasizing his concern during the routine hearing. He theorized that one contributing factor could be that banks have become excessively risk-averse due to stringent money-laundering regulations and aggressive supervisory practices. This cautious approach has led them to shy away from customers who might challenge their compliance capabilities.
Powell remarked, “We’re determined to take a fresh look at that,” noting that he has been “struck by the growing number of cases of what appears to be debanking.” This issue has garnered the attention of Republican lawmakers and new financial regulators appointed during President Donald Trump‘s administration, who allege that the previous administration’s banking agencies—including the Fed, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency—fostered this trend.
In a notable moment, Powell extended his gratitude to crypto-advocate Senator Cynthia Lummis for highlighting in a recent debanking hearing the Fed’s policy that imposes heightened supervisory scrutiny on bankers involved in controversial speech or activities. He announced that this particular policy would be removed from the internal manual it originated from.
While discussions around crypto oversight were not the focal point of Powell’s testimony, some critical issues within the industry were touched upon, such as stablecoins and central bank digital currencies (CBDCs). Powell conveyed the Fed’s support for new regulatory initiatives concerning stablecoins—digital tokens designed to maintain a stable value by being pegged to assets like the U.S. dollar.
“Stablecoins may have a significant future for consumers and businesses,” Powell remarked. “While we cannot predict that outcome now, it is essential to develop a regulatory framework that ensures the safe and sound advancement of stablecoins, protecting consumers and savers alike.”
When questioned about the possibility of launching a CBDC—a concept that has long raised concerns among U.S. crypto firms—Powell provided a clear response. “Yes,” he stated when asked if he would agree to never initiate a central bank digital currency.
The prospect of the U.S. matching the CBDC experiments undertaken by China and Europe has already diminished, particularly with the election of Trump and the emergence of congressional majorities staunchly opposed to such initiatives.
Powell is scheduled to appear again before the U.S. House of Representatives for further discussions on Wednesday. Additionally, crypto-related topics are set to be the highlight of a hearing in the House Financial Services Committee later on Tuesday afternoon.
