Jerome Powell said, the Federal Reserve chairman (Fed), that central bank regulator, does not intend to prohibit banks from providing crypto to legal customers, so long as they are aware of its risks.
Powell told a House Committee on Monetary Policy that banks and the Fed must be held accountable. “mindful”As an example, custody is one way that financial institutions can conduct crypto-related activities. Nevertheless, he cautioned banks against going overboard with their offers.
Then he added:
“In fact, in Fed-regulated banks, there are a lot of crypto activities happening now. They just happen under a framework we [the Fed] made sure the bank understood, and we understood, exactly what they are doing.”
After being asked by the Fed chairman if the collapse of crypto could impact the US banking system, and whether there were any possible ways to avoid this situation.
Measures to prevent the spread of infection
Powell was also asked about incidents involving Silicon Valley Bank (SVB), and Signature Bank. In March 2023, both banks were forced to close due to several factors. These included a lack in diversification and the declining value of investments made in US Treasuries.
Circle held $3.3 billion in USD Coin (USDC), its USD Coin reserves, when SVB collapsed.
Powell, however, did not refer to cryptography in his response, attributing it to the exposure of long positions on underwater securities, and unprotected deposits.
He also said that the Fed has re-analyzed investment made by mid-sized banks. “any characteristics”Similar to Signature and SVB to make sure they weren’t exposed to the exact same risks to prevent a larger contagion.
Open to innovation
Powell confirmed this for the second time within a month, that banks could offer crypto-services to their clients.
During his speech following the Federal Open Market Committee (FOMC) meeting, he said that the Fed is not interested in invading the relationship between banks in crypto. The Fed has a role to play in such cases.
The same can be said for He. The word “that” is a phrase that means, “that which”. “threshold has been a little higher for banks engaging in crypto activities,” Justifying the additional scrutiny that is required due to the novelty of the market.
Powell emphasized that, despite this, the Fed was still willing to embrace innovation on financial markets. He also said on Feb. 11 that the US will not issue a central bank digital currency (CBDC) as long as he is the Fed’s chairman.
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