Powell urges Congress to establish crypto regulations

Federal Reserve Chair Jerome Powell has called on Congress to develop a comprehensive regulatory framework for cryptocurrencies.

During a press conference following the Federal Open Market Committee (FOMC) meeting on January 29, Powell stated that banks are “perfectly able to serve crypto customers” as long as they manage the associated risks effectively.

He emphasised that while the Fed supports innovation, there is a need for clarity in regulations to prevent banks from excessively terminating accounts of legal crypto customers.

“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 remarked.

His comments were in response to concerns raised in a Financial Services Oversight Council report regarding the potential risks posed by stablecoins to financial stability.

Powell suggested that the establishment of a more robust regulatory apparatus around cryptocurrencies would be beneficial for both consumers and the financial system.

He noted that the Fed has been working closely with Congress on various issues related to digital assets, indicating a collaborative effort to address regulatory challenges.

Despite not taking a definitive stance on whether cryptocurrencies are beneficial for the financial system, Powell acknowledged that congressional action could help clarify the regulatory landscape.

The Fed chair's remarks come amid ongoing discussions about how best to regulate the rapidly evolving cryptocurrency market.

In the wake of his statements, Bitcoin's (CRYPTO:BTC) price rose approximately 3%, reflecting market optimism regarding potential regulatory developments.