Fed Chairman Powell Commits to Amending Debanking Policy With Crypto and Maintaining Interest Rates

During his testimony before the Senate Banking Committee, Federal Reserve Chairman Jerome Powell presented important views on monetary policy and the banking system, particularly the issue of debanking for crypto-related banks and controversial industries such as cannabis. Debanking Issues and Account Holders Powell admits that in the past, banks involved in crypto or controversial areas have encountered difficulties in being denied account access - a necessary requirement to directly access the Fed's payment system. According to him, these banks have had to endure unfair treatment due to the Fed's internal regulations, resulting in a lack of necessary account access to carry out independent transactions. These master accounts play a crucial role as they allow banks to directly transact with the Fed without relying on major intermediaries. Without master accounts, banks would struggle with payment and fund transfers, which would seriously impact business operations. Mr. Powell stated that many banks in the cryptocurrency sector such as Custodia, Signature, and even Silicon Valley Bank have been “locked out” of access to client accounts for many years. Accordingly, the Fed's guidance - specifically controversial operating rules outlined in the “Internal Enforcement Handbook” - has significantly hindered the development of these banks. Commitment to Reform and Support Stablecoins Under pressure from lawmakers, especially following Senator Cynthia Lummis's hearing, who criticized the Fed for 'gatekeeping' (gatekeeping) against banks involved in crypto, Powell pledged to address this mistake. He promised to completely remove the 'contentious activities' rule currently existing in the internal handbook to broaden access to account services for banks related to blockchain technology and cryptocurrencies. In addition, during the hearing, Powell also emphasized the Fed's support for efforts to build a legal framework for stablecoins - a type of digital currency designed to maintain stable value - with the goal of protecting consumers. Senator Mark Warner, a moderate voice on the committee, also affirmed his cooperation with colleagues such as Senators Scott and Lummis to build a legal framework for stablecoins, showing broad consensus on the need to adjust regulations in this area. Monetary Policy: Maintaining Stability Amid Pressure Despite facing pressure from investors and some voices calling for interest rate cuts, Powell affirmed that the Fed has no intention of reducing interest rates in the near future. With the current inflation rate still exceeding the 2% target, the current monetary policy - with interest rates ranging from 4.25% to 4.5% - is considered sufficient to contain inflation. He warned that reducing the policy restraint too quickly or too forcefully could 'impede' inflation control. Although the Fed implemented a one percentage point interest rate cut in Q4 2024 as inflation showed signs of easing, it paused in December and maintained the policy in subsequent adjustments. Consumer Protection and Financial Policy Issues The hearing also saw criticism from Senator Elizabeth Warren, who called for tighter consumer protection measures amid the contraction of the Consumer Financial Protection Bureau (CFPB) under the Trump administration. When asked who would be responsible for protecting consumers from bank fraud, Powell admitted that 'no other federal agency' oversees consumer oversight to the extent that the CFPB does. Regarding questions related to fiscal policy - especially customs duties and trade policies of the Trump administration - Powell somewhat avoided answering directly. He emphasized that the implementation of measures such as tariffs is not within the scope of the Fed's operations, and the Fed can only respond through monetary policy adjustments to deal with the economic impacts arising from those policies. Conclusion The recent hearing on Capitol Hill has clearly demonstrated the Fed's strategic vision under Powell's leadership in addressing the obstacles to the development of the banking sector related to cryptocurrencies. The commitment to expanding access to account holders and supporting the legal framework for stablecoins shows that the Fed is preparing important reforms to adapt to technological trends and innovations in the financial system. Meanwhile, maintaining a stable monetary policy, with the goal of controlling inflation, reflects the Fed's determination in the context of the economy still facing pressure from various external factors. These actions promise to have a profound impact on the banking industry and financial markets, opening a new chapter in the modernization of the U.S. financial system.