While he may not see eye-to-eye as much on cutting interest rates, Federal Reserve Board Chairman Jerome Powell was more in line this week with the Trump Administration in terms of cryptocurrency sentiment.
In his semi-annual testimony before Congress, Powell said he sees “a very significant change in tone” among banks and financial institutions regarding digital assets, suggesting there’s been a sort of coming of age of crypto.
“Have you seen an identifiable shift in banks or other regulated entities as it relates to the digital assets space?” asked Rep. Bryan Steil (R-WI), chairman of the House Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence.
“What I do see is a very significant change in the tone,” Powell replied. “It really does reflect evolving thinking and the evolving status of the crypto industry. I would expect, over time, we’ll see more activity.”
He added that the Fed’s view is “banks get to decide who their customers are” and “banks are free to provide banking services to the crypto industry, to crypto companies.” Banks can also conduct cryptocurrency activities, Powell noted, “as long as they do so in a way that is protective of safety and soundness.”
The Fed Chairman also mentioned crypto in his testimony before the Senate yesterday, noting that digital assets — particularly stablecoins — are becoming more a part of the mainstream financial landscape.
Bitcoin’s value climbed on the heels of Powell’s congressional appearance, CNBC reported. The cryptocurrency was up 1.71% as of noon on Wednesday to just under $107,100.00.
The news outlet also pointed to forthcoming legislation from Sen. Cynthia Lummis (R-WY), who leads the Senate Banking Committee’s Subcommittee on Digital Assets, that would provide a legal framework for crypto.
"I do see a very significant change in the tone. It really does reflect evolving thinking and the evolving status of the crypto industry." —Jerome Powell, Chairman, Federal Reserve Board
On Tuesday, Senate Banking Chairman Tim Scott (R-S.C.), along with Sens. Lummis, Thom Tillis (R-N.C.), and Bill Hagerty (R-TN), released a set of principles for developing comprehensive market structure legislation to address digital assets.
“America desperately needs digital asset legislation that promotes responsible innovation and protects consumers,” said Sen. Lummis. “The U.S. continues to sit on the sidelines while the digital asset industry seeks greener pastures.”
“That changes today,” she continued. “I am partnering with Chairman Scott to provide principles for market structure legislation to finally draw the line between a security and a commodity — and ensure the U.S. remains at the helm of global financial advancement.”
As Powell continued his testimony in the Senate, Federal Housing Finance Agency (FHFA) Director William J. Pulte, via posts on social media, initiated a potentially groundbreaking crypto change as he ordered Fannie Mae and Freddie Mac to prepare to count cryptocurrency as an asset in mortgage qualification.
Years Of Study And Experimentation
Federal agencies have been eyeing the creation of a U.S. digital currency for more than three years, dating back into the Biden Administration, and examining the effects of doing that. Then-President Joe Biden’s executive order signed March 9, 2022 to conduct that study aimed to support responsible digital asset innovation while addressing risks related to illicit finance.
However, President Trump revoked that order during his first days in office this year, replacing it with a new one: “Strengthening American Leadership In Digital Financial Technology.” That order, among other directives, calls for promoting development and growth of “lawful and legitimate dollar-backed stablecoins worldwide.”
The President also called for clear regulation and a regulatory framework that addresses digital assets. He specifically ordered “regulatory clarity and certainty built on technology-neutral regulations, frameworks that account for emerging technologies, transparent decision making, and well-defined jurisdictional regulatory boundaries.” FHFA Director Pulte's sweeping order to the GSEs on Wednesday is in line with that executive order.
Meanwhile, the mortgage and real estate industries have been crossing paths and innovating with cryptocurrency for years as well. However, the volatility of “floating” cryptocurrencies has been a problem, while stablecoins have offered more realistic potential.
