Powell says Fed has no intention of preventing banks from offering crypto services

The Federal Reserve (Fed) chairman, Jerome Powell, said that the cardinal slope regulator does not privation to forestall banks from serving crypto to perfectly ineligible customers arsenic agelong arsenic they recognize its risks. 

During a Feb. 12 House committee connected monetary policy, Powell said banks and the Fed should beryllium “mindful” that crypto activities tin beryllium done wrong fiscal institutions, citing custody arsenic 1 example. However, helium warned banks to debar going excessively acold successful their offerings.

He added:

“In fact, successful Fed-regulated banks, determination are a batch of crypto activities happening now. They conscionable hap nether a model we [the Fed] made definite the slope understood, and we understood, precisely what they are doing.”

The remarks came aft the Fed seat was asked if a crypto illness could impact the US banking strategy and if determination are immoderate ways to debar it.

Anti-contagion measures

Powell was besides questioned astir the Silicon Valley Bank (SVB) and Signature Bank incidents. Both banks collapsed successful March 2023 owed to a operation of factors, specified arsenic a deficiency of diversification, a diminution successful the worth of their investments successful semipermanent US Treasuries, and a slope run.

The banks were known to beryllium crypto-friendly, with Circle holding $3.3 billion of its USD Coin (USDC) reserves with SVB erstwhile it collapsed. 

However, Powell did not notation crypto successful his answer, attributing the illness to vulnerability to agelong positions successful underwater securities and unsecured deposits.

Additionally, helium said the Fed reanalyzed investments made by medium-sized banks that person “any characteristics” akin to Signature and SVB, to guarantee they were not exposed to the aforesaid risks successful an effort to debar a wider contagion.

Open to innovation

Notably, this is the 2nd clip successful a period that Powell has confirmed that banks tin connection crypto services to their customers.

During his code pursuing the ‎Federal Open Market Committee (FOMC) meeting, helium said that the Fed is not funny successful invading the narration betwixt banks successful crypto. In these cases, helium added that the Fed’s relation is to truthful overmuch analyse banks.

He also acknowledged that the “threshold has been a small higher for banks engaging successful crypto activities,” justifying the other scrutiny owed to the market’s novelty.

Nevertheless, Powell highlighted that the Fed remains unfastened to innovation successful fiscal markets. He besides said connected Feb. 11 that the US volition not contented a cardinal slope integer currency (CBDC) arsenic agelong arsenic helium is the Fed’s chairman.

The station Powell says Fed has nary volition of preventing banks from offering crypto services appeared archetypal connected CryptoSlate.