Fed chair Powell says he is committed to ending crypto debanking and pausing rate cuts

Source Cryptopolitan

Federal Reserve Chair Jerome Powell told lawmakers today he’s committed to fixing the crypto debanking disaster, while reiterating that he isn’t cutting interest rates anytime soon, despite the perceived pressure from US ‘crypto president’ Donald Trump.

“We’re keeping things steady. We know what we’re doing,” Powell told the Senate Banking Committee during his first of two Capitol Hill appearances for the week.

Powell then admitted that some banks, especially those tied to crypto or other controversial sectors like cannabis, did face unfair treatment from the Fed under former President Biden. Master accounts, which are needed in order for banks to access Fed services directly, were consistently being denied without explanations.

Cautious Powell makes rare pro-crypto move, backs stablecoins

What are master accounts, you might wonder. Well, these accounts allow direct access to the Fed’s payment system, meaning banks don’t have to rely on bigger institutions to clear transactions or settle payments. Without them, banks can’t operate independently.

And crypto banks like Custodia, Signature, and Silicon Valley Bank among others were locked out for years and years. The Fed’s own guidelines were actually a big part of the problem. Powell promised to fix that, starting with completely stripping out the “controversial” activity rule buried in the Internal Implementation Handbook.

The crypto-loving Senator Cynthia Lummis was the one who exposed the handbook policy during a Senate hearing a week ago, where she grilled the FDIC about the Fed’s role in preventing banks tied to crypto from getting master accounts, adding that she believes the central bank has been gatekeeping.

During the Senate hearing, Powell also said that the Fed supports efforts to make a regulatory framework around stablecoins “in order to protect consumers.” Mark Warner, one of the panel’s remaining moderate Democrats, agreed with Powell, and added that he’s working with Scott and Lummis and others on stablecoins.

Fed to continue holding rates steady

With inflation still sitting above the 2% target, Powell believes the current policy stance, with interest rates between 4.25% and 4.5%, is working.

“We don’t need to be in a hurry,” Powell told senators. “Reducing policy restraint too fast or too much could hinder progress.” The Fed cut its benchmark rate by a full percentage point in the fourth quarter 2024 after inflation began to cool, but then had to pause in December, and did the same in January.

Meanwhile, Elizabeth Warren slammed Powell during the hearing, blaming him for the lack of consumer protection after the Trump administration reduced the power of the Consumer Financial Protection Bureau (CFPB).

Warren asked Powell who is protecting consumers from predatory banking practices right now, and Powell admitted that “no other federal regulator” is handling consumer compliance on the same level as the CFPB.

Powell mostly dodged questions about fiscal policy, particularly regarding Trump’s tariffs and trade policies. But he didn’t completely avoid the topic, as he acknowledged that tariffs and trade restrictions have impacted the economy, particularly in cases where major trading partners don’t follow international rules.

“It’s not our job to make or comment on tariff policy,” Powell said. “We respond to it through monetary policy.”

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