Jerome Powell, the Chairman of the US Federal Reserve, has stated that banks are allowed to serve cryptocurrency customers as long as they effectively manage the risks involved.
The statement came amid the Fed’s decision to maintain its benchmark interest rate at 4.25% to 4.5%. This followed three consecutive rate cuts in late 2024.
Fed Chair Says Banks Can Serve Crypto Customers
During a Wednesday press conference, Powell addressed questions about the potential impact of speculation in the cryptocurrency market on financial stability and its role in household portfolios. He explained that the Fed’s role is to oversee banks.
“Banks are perfectly able to serve crypto customers as long as they understand and can manage the risks and it’s safe,” Powell responded.
Notably, the Securities and Exchange Commission (SEC) recently repealed the Staff Accounting Bulletin (SAB) 121. This regulation had previously discouraged banks from offering custody services for digital assets.
With SAB 121 now replaced by SAB 122, banks may have greater flexibility to offer crypto custody services. This shift could encourage broader adoption and further integrate cryptocurrency into traditional financial systems.
Powell emphasized that many of the banks the Federal Reserve supervises are already engaging in crypto activities. However, he acknowledged that the regulatory threshold for banks to enter this space remains high.
He explained that banks must be cautious when dealing with new asset classes like cryptocurrencies. This is especially true when operating within the federal safety net, including deposit insurance.
“We’re not against innovation, and we certainly don’t want to take actions that would cause banks to terminate customers who are perfectly legal just because of excess risk aversion,” Powell added.
Crypto Goes Mainstream!
The crypto community has reacted positively to Powell’s statements. Many see this as a sign of cryptocurrency’s growing acceptance in the traditional financial world.
“Banks will be a major catalyst for crypto in 2025. Mainstream era beginning,” Bitwise CEO Hunter Horsley posted on X (formerly Twitter).
The news comes amid a remarkable surge in Bitcoin’s price. After a rough start to the week, BTC has regained momentum. At press time, it exchanged hands at $105,066, representing gains of 2.24% over the past day.
Crypto analyst Marty Party attributed the surge to Powell’s statement in the latest X post.
“IMO: This implies the #FDIC will insure customer crypto held by banks,” he wrote.
However, not everyone in the banking industry is convinced of Powell’s statements. Fox Business reporter Eleanor Terrett shared an anecdote from a source at a major bank who dismissed Powell’s optimism.
“Yeah, that’s like saying, ‘I wouldn’t do it, but you make your own decisions,'” the source reportedly said.
Terrett further explained that the banker wasn’t convinced by Powell’s assertion that banks were fully capable of doing business with crypto customers. The banker emphasized that while they would like to work with crypto clients, regulatory challenges have made it extremely difficult for banks to engage with this sector.
Wirex
YouHodler
eToro
eToro
eToro
eToro
Phemex
BingX
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
