Powell Reaffirms Fed Has No Issue With Banks Conducting Electronic Money Activities

Federal Reserve Chairman Jerome Powell reiterated that the central bank does not oppose U.S. banks providing services to cryptocurrency companies or engaging in cryptocurrency-related activities as long as they adhere to established risk management standards and consumer protection. Powell made this statement during the biannual monetary policy report hearing before the House Financial Services Committee on June 24, reinforcing recent steps by federal regulators to remove long-standing barriers that have limited cryptocurrency's access to traditional banks. The Federal Reserve officially removed the "reputational risk" from the bank supervision framework on June 23, ordering examiners to erase subjective standards from the examination manual and instead focus on measurable financial risks. This decision links the Fed with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, which made similar amendments earlier this year. Together, these three regulatory agencies oversee all federally insured depository institutions in the United States. This coordinated policy change eliminates the vague and often unclear reasons that auditors have used to reject banking services for cryptocurrency companies or hinder banks from providing services such as Bitcoin transactions or deposits. According to the update instructions, Fed employees will be retrained to implement consistent changes across all supervised entities and will coordinate with peer agencies to ensure consistent supervision. Powell laid the groundwork for this approach in early April when he called on Congress to establish clear rules on stablecoins and pledged that the Fed has no intention of intervening in the legal relationship between banks and cryptocurrency companies. Since then, he noted that while regulators remained cautious following the cryptocurrency market crisis in 2022, some existing guidelines may be relaxed to support 'responsible innovation' as long as banks maintain tight risk controls. Industry participants have welcomed the removal of reputational risks and the clear stance of the Fed as a milestone for integrating digital assets into the regulated financial system. Banks are expected to expand services from basic accounts to deposit, payment, and cryptocurrency payment services. Despite the openness of this regulation, Powell also told lawmakers that the Fed still expects to consider cutting interest rates later this year, although internal forecasts suggest that inflation may still be high, a prospect that some economists believe could confuse the market and blur the overall policy picture. Regulatory authorities do not set a timeframe for the next guidance, but emphasize that legal, liquidity, and credit risk standards still apply closely as banks expand their cryptocurrency-related operations.