From Crackdown to Clarity: Powell’s Plan to Regulate Stablecoins Without Stifling Crypto’s Future

1. Advocacy for Stablecoin Regulation:

Federal Reserve Chair Jerome Powell emphasized the need for a regulatory framework for stablecoins during his remarks at the Economic Club of Chicago. He highlighted their growing relevance in payments and settlements, noting that stablecoins "could have fairly wide appeal" but require consumer protections, transparency, and oversight .

2. Congressional Momentum:

Powell acknowledged past unsuccessful attempts to collaborate with Congress on stablecoin legislation but observed a shifting climate, with lawmakers now actively revisiting efforts to formalize rules. Proposals like the GENIUS Actand STABLE Act are under discussion, aiming to establish standards for issuer reserves and federal oversight .

3. Openness to Crypto Banking:

Powell signaled a potential loosening of restrictive guidance for banks engaging with crypto, provided safety and soundness are maintained. He clarified that the Fed does not intend to block banks from serving lawful crypto clients, citing custody services as an example of permissible activity under proper supervision .

4. Balancing Innovation and Risk:

While advocating for regulatory clarity, Powell stressed the importance of fostering innovation without compromising financial stability or consumer protections. He noted the need for a "comprehensive oversight structure" as digital assets integrate further into traditional finance .

5. Market Context:

Stablecoins, led by USDT and USDC, now represent a $227 billion market, with $14 trillion in annual transfer volume—surpassing Visa. Powell’s remarks reflect a broader shift among U.S. financial authorities toward accommodating digital assets, especially under the Trump administration’s pro-crypto policy direction .