Federal Reserve Chairman Powell's latest speech: Crypto is becoming mainstream, and related regulations need to be relaxed

Federal Reserve Chairman Jerome Powell emphasized the need for a regulatory framework for stablecoins, stating that Congress is renewing efforts to legislate such rules due to the growing importance of digital assets.
Powell acknowledged past failures in establishing stablecoin regulations but noted lawmakers' renewed interest, stressing the need for consumer protections and transparency.
He indicated the Fed may relax some banking guidelines for Crypto-related activities to foster responsible innovation, provided financial security and consumer safeguards are maintained.
Powell clarified the Fed does not intend to restrict banks from serving legitimate Crypto clients, citing Crypto custody as an example of safe integration under proper oversight.
Stablecoin usage is surging, with $14 trillion transferred last year, outpacing Visa, highlighting their role in payments and settlements.
While no federal stablecoin regulations exist yet, legislative proposals like the GENIUS Act and STABLE Act are under discussion, reflecting a shift toward formalizing rules.
The Fed's stance signals increasing openness to shaping digital asset policies as stablecoins gain traction in global finance.

‍Federal Reserve Chairman Jerome Powell reiterated the need to establish a regulatory framework for stablecoins and said the Fed has no intention of restricting the banking industry’s interaction with the Crypto industry.

Powell said in a speech at the Economic Club of Chicago on April 16 that both houses of the U.S. Congress are renewing their efforts to legislate for a stablecoin framework. He believes that given the growing importance of these digital tools, it is necessary to establish a regulatory framework.

Powell mentioned that previous efforts by the Fed to work with Congress on a legal framework for stablecoins were unsuccessful. However, he noted that “the landscape is changing” and that lawmakers are now showing new interest in formalizing regulations.

He stressed that such a framework should include consumer protections and ensure transparency, adding: “Stablecoins are a digital product that may actually have quite broad appeal.”

Relaxation of regulations

Powell also talked about the Fed's stance on Crypto-related banking activities. He acknowledged that U.S. banking regulators, including the Fed, have taken a conservative approach in issuing guidance on how banks should manage their exposure to digital assets.

However, he said some of those guidelines could be relaxed to accommodate responsible innovation, as long as consumer protection and financial security could be ensured.

“We will try to do it in a way that preserves the safety and soundness of the financial system,” he said.

The comments further elaborated on Powell’s previous statement that the Fed has no intention of preventing banks from serving legitimate Crypto customers.

Earlier this year, Powell made it clear in his testimony to Congress that Crypto activities are already taking place within banks regulated by the Federal Reserve under the established regulatory framework.

He cited Crypto custody as an example of how such services can be conducted safely if banks and regulators understand the scope of these activities.

Powell also acknowledged the regulatory complexity of integrating digital assets into traditional finance and called for a more comprehensive regulatory structure.

Crypto assets and banking

At a press conference after the February Federal Open Market Committee (FOMC) meeting, Powell said that while the threshold for banks to participate in Crypto business remains high, the Fed does not intend to cut off banking services for legally operating digital asset companies.

While discussions around stablecoin legislation continue, their use for payments and digital settlements continues to grow. Last year, stablecoins transferred nearly $14 trillion, surpassing Visa.

Powell's statement suggests the Fed supports Congress' efforts to develop formal rules for stablecoins, provided such legislation strikes a balance between innovation and risk control.

There is currently no federal regulatory regime specifically for stablecoins, but several legislative proposals have been introduced in recent Congresses, most notably the GENIUS Act and the STABLE Act, introduced by the House of Representatives and Congress, respectively.

The Fed’s latest stance suggests that U.S. financial authorities are increasingly willing to participate in the formulation of digital asset policies as stablecoins become increasingly integrated into global financial markets.