When confronted by members of the Senate Banking Committee about concerns over the “debanking” trend plaguing the crypto industry, Federal Reserve Chairman Jerome Powell said he’s also worried about it and is already tweaking internal supervision policies at the Fed.
“I too, am troubled by the quantity of these reports,” Powell said in routine testimony before the Senate Banking Committee on Tuesday. He offered that “one theory is that banks are just very risk averse” about money-laundering rules and aggressive supervision under which they’re unwilling to welcome customers that may stretch their compliance demands.
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“We’re determined to take a fresh look at that,” said Powell, who added that he’d been “struck by the growing number of cases of what appears to be debanking.”
Republican lawmakers and the new financial watchdogs appointed by President Donald Trump have devoted special scrutiny to the so-called debanking they say was encouraged by the previous administration’s banking agencies, including the Fed, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
Powell also thanked crypto-advocate Senator Cynthia Lummis for raising in a recent debanking hearing that the Fed has a policy to direct greater supervisory scrutiny on bankers who engage in controversial speech or activity. He said that policy is being deleted from the internal manual it came from.
While crypto oversight wasn’t a central topic at Powell’s hearing on Tuesday, a few of the industry’s big issues were raised, including stablecoins and central bank digital currencies (CBDCs).
Powell said the Fed supports new regulatory efforts around stablecoins — the tokens designed to maintain a steady value by being pegged to assets such as the U.S. dollar.
“Stablecoins may have a big future with consumers and businesses,” Powell 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.”
The chairman of the U.S. central bank also gave a clear answer to his intentions regarding CBDCs — a nebulous threat of a digital dollar that had long concerned U.S. crypto firms, though no U.S. proposal had ever really developed. When asked whether he’d agree to never launch a CBDC, Powell simply responded, “yes.”
The possibility of matching Chinese and European experiments with CBDCs had already grown more remote in the U.S. at the election of Trump and the congressional majorities who are loudly opposed to such an effort.
Powell will speak again at a hearing in the U.S. House of Representatives on Wednesday. And crypto was set to be the featured topic later Tuesday afternoon at a hearing in the House Financial Services Committee.
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