Jerome Powell, the Federal Reserve’s chief, has been explicit that U.S. banks can serve crypto customers, provided they know the risks and mitigate them. At a press conference on Wednesday, Powell said the Fed is not anti-innovation. Indeed, banks can completely work with crypto clients as long as they make sure their operations are secure, he said.
Powell also noted that because cryptocurrency is a relatively new asset class, it has more risks associated with it. But he also stressed that banks should not reject legal crypto customers out of fear or unnecessary caution. His comments come as concerns over “debanking” are rising, including and particularly the practice of shutting out certain industries, crypto among them, from the financial system.
These comments are seen as a reversal in the Fed’s policy and seem to have been welcomed by many in the crypto industry including the Chief Legal Officer of Coinbase. Powell said the Fed’s job is to make sure that banks engage with crypto with risk appetite but also the ability to serve their customers without unnecessary risk.
Banks must be prudent in their dealing with crypto given that digital assets are constantly changing, but they are free to provide services as long as they properly handle the associated risks much like how they have done in every other industry.
Powell’s comments come after documents were released showing agencies such as the FDIC had in the past discouraged banks from providing crypto services. Now, it appears, that the Fed is adopting a much less tight attitude, as long as financial entities can deliver the goods safely.
