Federal Reserve Chair Jerome Powell has voiced strong support for the advancement of cryptocurrency legislation currently under review in Congress, emphasizing the urgent need for a regulatory framework for stablecoins in the United States.
Powell Advocates for Legislative Clarity
“It’s very positive to see these bills moving forward. We absolutely need a framework for stablecoins,” Powell stated during his latest public remarks.
His comments followed the Senate’s approval of the GENIUS Act, a landmark bill designed to regulate the issuance and circulation of stablecoins. The legislation now awaits consideration by the House of Representatives. Parallel efforts continue on the CLARITY Act, which aims to define the broader regulatory architecture for the cryptocurrency market.
Shift in Federal Reserve Policy
Powell’s endorsement coincides with a significant policy adjustment by the Federal Reserve - the decision to eliminate the use of “reputational risk” as a criterion when evaluating banks’ relationships with crypto-related entities. This measure had previously been employed by regulators to discourage financial institutions from servicing crypto companies.
Earlier, the Fed’s Vice Chair publicly dismissed accusations that the agency had engaged in debanking the crypto sector. Instead, he reaffirmed the central bank’s commitment to a balanced approach regarding digital asset firms’ access to traditional banking services.
A New Approach Toward the Crypto Industry
“We believe banks are fully capable of deciding who their customers are,” Powell emphasized. “Financial institutions are free to conduct business with cryptocurrency firms as long as it does not compromise their safety and soundness.”
Powell further acknowledged that the practice of denying financial services to entire crypto sectors - including the cryptocurrency industry - had become a recognized issue throughout 2024. He noted that the Federal Reserve had reassessed this stance in light of growing concerns from both market participants and policymakers.
Wall Street’s Changing Outlook
Powell also highlighted a broader shift in sentiment toward digital assets among major financial institutions. The Federal Reserve Chair forecasted increased participation and investment from Wall Street players in the crypto sector over the coming years.
Market Forecast and Policy Implications
The alignment of regulatory priorities between the Federal Reserve and Congress suggests an accelerating timeline for comprehensive digital asset legislation. Market analysts forecast that the passage of the GENIUS Act could significantly enhance institutional confidence in U.S.-issued stablecoins, potentially driving capital inflows into regulated dollar-backed tokens.
Takeaways From Powell’s Remarks:
- The Federal Reserve formally supports the GENIUS Act and the regulation of stablecoins.
- Banks retain full discretion to work with cryptocurrency firms, provided core risk standards are met.
- The Fed has abandoned the use of “reputational risk” as a barrier to crypto banking relationships.
- Wall Street sentiment toward crypto is improving, with forecasted growth in institutional involvement.
- Legislative clarity is expected to strengthen the U.S. stablecoin market and attract further global capital.
Political Backdrop
Powell’s remarks come amid rising political pressure. In April, President Donald Trump called for Powell’s resignation, citing dissatisfaction with the Federal Reserve’s pace in lowering interest rates.
As the GENIUS Act advances toward potential enactment, the crypto market is closely monitoring its impact - one that could reshape the competitive landscape for stablecoins, banking partnerships, and the broader adoption of digital assets within the U.S. financial system.
