Powell Softens Stance: Banks Get Green Light on Crypto Engagement

In a move seen as a nod to the crypto economy, Jerome Powell has indicated that the Federal Reserve is open to reducing restrictions on banks working with digital assets — and has voiced support for creating clear legal standards for stablecoins.

The FDIC’s rollback of past advisories and the OCC’s approval of crypto operations suggest a new regulatory era is unfolding — one that embraces innovation while seeking to protect financial stability.

It was Wednesday, April 16, when Jerome Powell took the stage at the Economic Club of Chicago. His message was clear: digital assets are no longer theoretical—they’re now central to discussions about safeguarding the financial system’s future.

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Powell Backs Softer Stance on Crypto for Banks

Fed Chair Jerome Powell said that prior banking oversight had erred on the side of rigidity and that it's time to create space for innovation while keeping risks in check.  

We'll try to do it in a way that preserves safety and soundness, but that permits and fosters appropriate innovation, but does so in a way that again doesn't put consumers at risk in ways they don't understand or make banks less safe and sound,

the Fed Chair remarked.

Earlier this year, the FDIC began scrapping its old directives and is now working on fresh guidelines. These will outline which crypto activities banks can legally pursue—minus the red tape of prior sign-offs.

The OCC has already greenlit banks to work with clients using crypto wallets and to incorporate blockchain tools into their service models.

Powell stated that the Federal Reserve is collaborating with peer agencies to align regulatory strategies across state and federal jurisdictions, aiming to reduce legal ambiguity and foster consistency.

Stablecoins on Lawmakers’ Radar  

Federal Reserve Chairman Jerome Powell made it clear: a consistent approach to stablecoin regulation is no longer optional — it’s essential.

Depending on what’s in it, that’s a good idea. We need that. There isn’t one now,

Powell noted during his address.

Bills mandating oversight for dollar-backed stablecoins have already moved through committees in both the Senate and the House. Bo Hines, Executive Director of the U.S. Presidential Advisory Council on Digital Assets, believes the final draft could hit the President’s desk in as little as two months.

The bill lays out core principles for regulating stablecoins:

• issuers must hold sufficient reserves,
• submit to regular third-party audits,
• and publicly disclose the structure of their backing assets.

With a total market cap nearing $227 billion, the stablecoin sector remains heavily centralized — USDC and USDT account for more than 88% of that value, according to RWA.xyz.

Related: Senate Banking Committee Passes Stablecoin Bill: What the Genius Act Means 

Industry Reset and Future Positioning

The Federal Reserve Chair noted that while the crypto industry suffered a string of collapses and scams between 2022 and 2023, it is now evolving beyond that chaos and inching toward mainstream relevance. Powell underlined that regulators must equip consumers with transparent information about risks—without building regulatory traps disguised as safeguards. 

As regulatory pressure eases, traditional banks may find it easier to step into the crypto arena—fueling integration and opening up new investment opportunities. With crypto custody and digital asset services on the table, established players are poised to reshape the competitive landscape.

Even so, calls for unified risk management grow louder. Without aligned safeguards against cyber risks and operational failures, the system’s stability could be tested under pressure.

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