Fed Chair Powell calls for ‘fresh look’ at debanking amid crypto industry concerns

Federal Reserve Chair Jerome Powell said it is time to "take a fresh look" at debanking following criticism that the crypto industry is being shut out of banking services.

During a Senate Banking Committee hearing on Tuesday, the committee's Chair Tim Scott (R-S.C.) asked if Powell would work with him to ensure that financial rules don't "impose more burden than is necessary."

"I will commit to working with you on that, we do try to avoid excessive burden," Powell said. "Look, I think it's fair to take a fresh look, frankly, on debanking."

"We don't intentionally do these things, but sometimes regulation leads things to happen and we need to be working on that," Powell added.

Scott also asked Powell if he agreed to commit to working with lawmakers to end debanking; Powell said yes.

Concerns around crypto debanking have come back into the spotlight in Washington as lawmakers hold hearings and steer investigations to look into the issue. Lawmakers held two hearings last week in the House and Senate focused on the matter.

Meanwhile, crypto firms say they face challenges when looking to establish and maintain accounts in the U.S. Coinbase took a step further and sued the Federal Deposit Insurance Corporation last year, through consultant firm History Associates, accusing the agency of trying to cut off the crypto industry from the banking sector. Big bank CEOs have since opened up about their struggles with crypto.

Later during the Senate hearing, Powell said he was "struck" by the prevalence of debanking. 

"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," he said. 

During a press conference last month, Powell said banks can serve crypto customers as long as they can manage the risk.

"The threshold has been a little higher for banks engaging in crypto activities and that's because they're so new," Powell said in January.

Update: Feb. 11, 4:55 p.m. UTC to include comments from Powell