Federal Reserve Chairman Jerome Powell boldly stated at a recent congressional hearing that the Fed will not prevent Wall Street banks from entering the cryptocurrency space and is actively reviewing related policies to address the challenges of de-banking.
These remarks undoubtedly injected a strong dose of confidence into the cryptocurrency industry.
Cryptocurrency is approved for circulation, but the risks for banks remain unresolved.
In response to lawmakers' concerns about the strained relationship between banks and cryptocurrency companies, Powell admitted to feeling uneasy about the number of related reports and hinted that banks may keep their distance from cryptocurrencies due to money laundering risks.
He confirmed that the Federal Reserve had implemented policies requiring increased scrutiny of banks involved in cryptocurrencies, but these policies are about to be abolished. Powell reiterated that the Fed will re-examine this issue, striving to pave the way for banks' participation in the cryptocurrency market while ensuring that risks are manageable.
Stubborn inflation, with interest rate cuts far off.
On the issue of inflation, Powell's position is firm. He informed lawmakers that although the Federal Reserve has made initial progress in controlling inflation, the inflation rate is still far above the target level.
Latest data reveals that the core inflation rate rose 0.4% in January, the largest increase since last March. Powell clearly stated that the Federal Reserve will continue to maintain a high interest rate policy and will not adjust its stance for now.
As soon as these words were spoken, the market reacted swiftly, with the stock market opening lower and declining, treasury yields soaring, and the dollar strengthening.
The prospects for stablecoins and CBDCs remain uncertain.
Although cryptocurrency was not the core topic of this hearing, lawmakers still questioned Powell about stablecoins and central bank digital currencies (CBDCs).
Powell reiterated that stablecoins need to establish an appropriate regulatory framework to ensure robust development, while the advancement of CBDCs requires congressional approval.
He revealed that the Federal Reserve is studying a digital dollar, but there are no formal launch plans yet.
In summary, Powell's statements bring positive news for the cryptocurrency industry while reiterating the importance of regulation. Faced with stubborn inflation, the Federal Reserve remains steadfast in its high interest rate policy, and Trump's pressure has failed to shake Powell's position. In the future, the development of cryptocurrencies and digital dollars remains fraught with uncertainty, but the improvement of the regulatory framework will be key.
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