Federal Reserve Chairman Powell Expresses Concerns Over Crypto ‘Debanking’ Trend

Date: February 11, 2025

Updated: 7:23 p.m. UTC

Published: 6:29 p.m. UTC

During a testimony before the Senate Banking Committee, Federal Reserve Chairman Jerome Powell addressed the troubling trend of ‘debanking’ within the cryptocurrency sector, acknowledging concerns about increased scrutiny from banks and regulatory agencies. Powell stated that recent reports of debanking have raised alarm bells, prompting the Federal Reserve to review its internal supervision policies.

Debanking Concerns in the Crypto Industry

In a session intended primarily to discuss broader economic issues, Powell emphasized that he shares the concerns expressed by lawmakers regarding the challenges faced by crypto firms in accessing banking services. ‘I too am troubled by the quantity of these reports,’ Powell remarked, underlining the sensation that banks may be overly cautious due to strict money laundering regulations and heightened supervisory measures.

Powell suggested that this significant risk aversion among banks could be leading to a reluctance to engage with clients operating in the cryptocurrency space. He acknowledged the increasing frequency of debanking cases and noted, ‘We’re determined to take a fresh look at that.’

Republican members of Congress and new financial regulators appointed by former President Donald Trump have criticized the previous administration’s banking policies, which they believe contributed to the current debanking trend impacting the crypto sector.

Regulatory Developments on Crypto Policies

During the hearing, Powell also thanked Senator Cynthia Lummis, a vocal advocate for cryptocurrency, for contributing insights in a recent debanking hearing. The senator pointed out that the Federal Reserve had previously implemented a policy that increased scrutiny on bankers involved in controversial activities. According to Powell, that policy is now being removed from the Fed’s internal manual.

While the primary focus of the hearing was not on crypto oversight, key industry issues such as stablecoins and central bank digital currencies (CBDCs) were discussed. Powell articulated the Fed’s support for establishing regulatory frameworks around stablecoins—digital tokens designed to maintain a stable value by being pegged to assets, like the U.S. dollar. He conveyed the potential importance of such tokens for consumers and businesses, remarking, ‘It is important for the development of stablecoins — in a safe and sound manner that protects consumers and savers.’

On the subject of CBDCs, Powell directly responded to inquiries about whether he would agree to never launch a U.S. digital dollar by simply stating, ‘yes.’ His response seems to dampen the prospects of the United States following in the footsteps of China and Europe, where CBDC experiments are already underway.

Outlook on Monetary Policy

In addition to crypto-related discussions, Powell provided insights into his views on the current state of the economy and interest rates. He expressed confidence about the economy’s position, stating, ‘We’re in a pretty good place with this economy.’ While advocating for the continued assessment of inflation, Powell indicated that the current policy rate was appropriate and that there was no urgent need for further reductions at this time.

The Federal Reserve had previously cut rates three times in late 2024, totaling a reduction of 100 basis points. However, a recent series of positive economic reports on inflation and growth has led the Fed to halt any immediate plans for further easing. This shift has had ripple effects throughout the financial markets, including impacting crypto prices, with Bitcoin experiencing a decline of 2.35% to $95,140 on the same day.

As the regulatory landscape continues to evolve, Powell is scheduled to testify again in the U.S. House of Representatives, where crypto issues will take center stage in discussions.

For continued coverage of developments in the cryptocurrency sector and government policy, stay tuned to our updates.

Authors:

Jesse Hamilton – Deputy Managing Editor, CoinDesk

Stephen Alpher – Managing Editor for Markets, CoinDesk

This article aims to bring readers the latest insights on cryptocurrency regulations and the Federal Reserve’s stance toward the evolving financial landscape.

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