On Tuesday, Federal Reserve Chair Jerome Powell said that the Fed supports establishing clear regulations for stablecoins to protect consumers during his testimony to the Senate Banking Committee.
Powell said the central bank is offering “technical thoughts” on the matter. This comes despite past warnings from former Treasury Secretary Janet Yellen, who has stressed the urgency of regulating these digital assets.
In the hearing, the main topic is debanking, where crypto companies struggle to access banking services. Sen. Tim Scott (R-S.C.) asked Powell whether he would cooperate with Congress to avoid excessive regulatory burdens on cryptocurrency firms. Powell concurred, stating, “I think it’s fair to take a fresh look, frankly, on debanking.”
Furthermore, he admitted that while the Fed does not intentionally push crypto firms out of banking, regulation can sometimes have unintended consequences.
Powell further acknowledged concerns about the issue, stating, “I will tell you that I am struck, and my colleagues and I are struck by the growing number of cases of what appears to be debanking, and we’re determined to take a fresh look at that.”
His remarks align with ongoing congressional hearings investigating how U.S. banks treat crypto firms.
Powell stated on monetary policy that the FED is not in a rush to decrease interest rates because inflation is over its 2% objective. “We know that reducing policy restraint too quickly or too much can stymie progress on inflation,” he added, warning that hasty rate reduction might undo recent economic improvements.
The U.S. economy grew 2.5% in 2024, with strong consumer spending and a resilient job market. Unemployment is at 4%, and monthly job increases have averaged 189,000 over the last four months.
Although inflation has come down a lot from its highest point, core PCE inflation was still 2.8% in December, which is above the Fed’s 2% target.
The Fed has kept interest rates between 5.25% and 5.5% since July 2023, following aggressive hikes to combat inflation. Powell reiterated that future rate decisions will depend on economic data and evolving risks.
Also Read: Fed Chair Powell says banks can serve crypto with caution
