Fed chair Jerome Powell reiterates that he won’t block Wall Street banks from crypto

Federal Reserve Chair Jerome Powell told lawmakers that the central bank is not stopping Wall Street banks from dealing with crypto. Speaking before the House Financial Services Committee today, Powell addressed concerns over financial institutions severing ties with crypto companies, a practice known as “debunking,” after talking about it yesterday in front of the Senate Banking Committee.

“I, too, am troubled by the quantity of these reports,” Powell said, responding to lawmakers who pressed him on the issue. He suggested that banks may be backing away from crypto due to risk concerns tied to money-laundering rules.

“One theory is that banks are just very risk averse.” Powell confirmed that the Fed is already making internal changes. “We’re determined to take a fresh look at that.”

His comments came after multiple Republican lawmakers, along with crypto-friendly financial watchdogs appointed by President Donald Trump, accused regulatory agencies of encouraging banks to cut off the crypto industry.

At the hearing, Powell acknowledged that the Fed had previously issued policies directing greater scrutiny on banks that engage with controversial sectors. He confirmed that those policies were being removed.

Powell warns rate cuts aren’t coming, inflation still a problem

Powell also spent time on inflation, telling lawmakers that while the Fed has made progress, the job isn’t done. “I would say we’re close, but not there on inflation,” he said during his testimony before the House Financial Services Committee on Wednesday. “Last year, inflation was 2.6%—so great progress—but we’re not quite there yet.”

The latest Consumer Price Index (CPI) report, released the same day, showed core inflation—excluding food and energy—jumped 0.4% in January, the biggest increase since March. Housing, prescription drugs, car insurance, and grocery prices all rose, with egg prices leading the surge.

Powell kept it real: rates will stay high. “We want to keep policy restrictive for now,” he said. The Fed has cut borrowing costs by a full percentage point since September, but Powell made it clear they’re taking a pause. “We do not need to be in a hurry to adjust our policy stance.”

Markets reacted fast. Stocks opened lower, Treasury yields shot up, and the dollar strengthened. Traders had previously priced in two rate cuts this year, but after the CPI report, expectations dropped to just one.

Trump pushes for rate cuts, Powell dodges political questions

Just 2 hours before Powell’s testimony, Trump took to Truth Social demanding lower interest rates, saying they should “go hand in hand with upcoming Tariffs.”

When asked about Trump’s comments, Powell avoided direct engagement. “I never comment on anything the president says,” he told lawmakers. “The American people can be confident the Fed will continue to make decisions based on what’s happening in the economy.”

Trump recently ordered a 25% tariff on steel and aluminum imports and added a 10% duty on all Chinese goods. He also delayed new levies on Canadian and Mexican imports while threatening reciprocal tariffs on countries that tax US goods.

Powell said that these policy changes could impact inflation and economic growth, but he maintained that it’s not the Fed’s job to comment on government trade policy. “The economy could evolve in ways that would lead us to alter interest rates,” Powell said, pointing to tariffs, immigration, fiscal policy, and regulatory changes as potential factors.

Now crypto wasn’t the central focus of Powell’s hearing, but the issue came up multiple times. In addition to concerns over debanking, lawmakers questioned him on stablecoins and central bank digital currencies (CBDCs).

Powell reiterated the Fed’s position that stablecoins, which are tied to assets like the US dollar, need proper oversight. “Stablecoins may have a big future with consumers and businesses,” he said. “We can’t know that now, but it is important for the development of stablecoins—in a safe and sound manner that protects consumers and savers and all—that there be a regulatory framework.”

Powell didn’t offer new details on CBDCs but repeated that the Fed would not move forward with one without congressional approval. The central bank has been researching digital dollars, but there’s no official plan to launch one.

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