Jerome Powell and Crypto: A Fed Chair’s Love-Hate Relationship
For over a decade, cryptocurrencies have been a hot topic in the financial world, and Federal Reserve Chair Jerome Powell has been a central figure in the debate.
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As the Fed Chair, Powell wields significant influence (often indirectly through interest rate decisions) over how the U.S. economy adapts to and interacts with digital assets.
Initially a Bitcoin and crypto skeptic, Powell has gradually shown measured openness to certain aspects of blockchain technology while continuing to voice concerns about potential risks.
In this article, we trace Jerome Powell’s evolving stance on crypto—from early skepticism to his current views on stablecoins, debanking, and a potential U.S. central bank digital currency (CBDC).
Powell is a key example of the challenge traditional finance leaders face in balancing innovation with financial stability.
How Jerome Powell Became Fed Chair
Jerome Hayden “Jay” Powell (born 1953) has served as the 16th Chair of the U.S. Federal Reserve since 2018. A Washington, D.C. native, he earned his degree from Princeton University and later studied law at Georgetown University Law Center. Powell began his career in law but soon transitioned into investment banking, working for firms like The Carlyle Group.
In the early 1990s, he briefly served as Under Secretary of the Treasury for Domestic Finance under President George H.W. Bush. He returned to public service in 2012 when President Barack Obama appointed him to the Federal Reserve Board of Governors.
Powell is known for his ability to find compromises, earning support from both sides of the political spectrum. In early 2020, he received widespread recognition for the Federal Reserve’s swift response to the COVID-19 crisis. However, some critics argued that large-scale stimulus measures may have fueled asset price inflation.
Despite ongoing debates, President Joe Biden reappointed Powell, and he was confirmed for a second term in May 2022.
As the Fed Chair, Powell oversees U.S. monetary policy, guided by the Fed’s dual mandate—maintaining price stability and ensuring maximum employment. His stance on cryptocurrencies is particularly significant, shaping his cautious but evolving approach to digital assets.
Strategic Bitcoin Reserves: Jerome Powell’s Skepticism and Warnings
As cryptocurrencies gained mainstream attention, Jerome Powell remained cautious in his assessments. He emphasized that Bitcoin’s high volatility makes it more of a speculative asset than a practical currency.
From the Federal Reserve’s perspective, any asset prone to sharp price fluctuations cannot function as a stable store of value or a reliable medium of exchange, both essential characteristics of money.
Powell has also expressed concerns about fraud and investor protection. While Bitcoin and other cryptocurrencies were once closely linked to illicit activities, their use in criminal transactions has significantly declined over time.
However, he remains focused on the risks of money laundering, market manipulation, and consumer losses due to fraud. His main concerns center on the volatility of cryptocurrencies and their potential use in criminal activities.
Like everyone else we’ve been watching what’s been happening in the crypto space and what we see is quite a lot of turmoil, we see fraud, we see a lack of transparency, we see run risk, we see lots of things like that,” Powell said. “What we’ve been doing is making sure that the regulated financial institutions that we supervise and regulate are careful and taking great care in the ways they engage with the whole crypto space,
Powell stated a few years ago.
Jerome Powell has never called for a complete ban on cryptocurrencies but has repeatedly emphasized that digital assets lack the transparency and reliability of traditional currencies. For the Federal Reserve, maintaining financial stability and protecting consumers remain top priorities, shaping a cautious approach to deeper involvement in the crypto sector.
After Donald Trump’s election, discussions about creating a strategic Bitcoin reserve gained momentum, with crypto industry leaders, financial experts, and U.S. lawmakers actively debating the idea.
Powell’s stance was expected. He stated that the Federal Reserve is legally prohibited from holding Bitcoin in its reserves and made it clear that he does not support any changes to the law that would allow it.
At multiple press conferences, the Fed Chair made it clear that the idea of a strategic Bitcoin reserve is beyond the Fed’s authority and could only be implemented by Congress. He stated that the Federal Reserve has no mandate to hold digital assets and does not see any justification for doing so.
We're not allowed to own Bitcoin and not looking for law changes. Fed is not looking to own Bitcoin,
Jerome Powell emphasized.
Debates on Stablecoins
As the cryptocurrency market expanded, stablecoins emerged as a unique class of digital assets. These tokens are pegged to fiat currencies, most commonly the U.S. dollar, allowing them to maintain a stable value linked to the underlying asset.
Compared to Bitcoin and other cryptocurrencies, stablecoins have much lower volatility, making them more suitable for payments. Jerome Powell has acknowledged their potential, noting that stablecoins could help improve financial infrastructure by increasing transaction speed and efficiency.
However, he has warned about the systemic risks stablecoins could pose, especially if they become widely used without proper regulation. A large-scale withdrawal from a major stablecoin issuer could trigger financial panic, impacting the broader market.
For this reason, the Federal Reserve has consistently advocated for strict regulations on reserves and liquidity, similar to those imposed on banks and money market funds.
Powell has frequently compared stablecoin issuers to banks, emphasizing that both manage customer funds and should be subject to rigorous oversight to protect consumers and ensure financial stability.
Stablecoins may have a big future with consumers and businesses. We can't know that now, but it is important for the development of stablecoins — in a safe and sound manner that protects consumers and savers and all — that there be a regulatory framework,
Powell noted.
In other words, Jerome Powell is more open to stablecoins than traditional cryptocurrencies but insists that strong regulation is necessary.
Rather than rejecting the technology, he acknowledges that stablecoins could enhance the traditional financial system. This perspective reflects the Federal Reserve’s willingness to adapt, as long as these digital assets operate within a secure and regulated framework.
Banks, Cryptocurrencies, and the Challenge of Debanking
As the cryptocurrency market grew, banks struggled with the uncertainty of servicing businesses tied to digital assets. Many financial institutions closed accounts or refused banking services to crypto companies, citing the high costs of complying with Anti-Money Laundering (AML) regulations and the Bank Secrecy Act (BSA).
This process, known as debanking, has drawn strong criticism from lawmakers. One of its most vocal opponents is Senator Cynthia Lummis, a key figure in the crypto space, who accused federal regulators of pushing legitimate crypto businesses out of the banking system.
During Congressional hearings, Jerome Powell acknowledged concerns about debanking in the crypto industry. He stated that banks can provide services to legitimate crypto businesses as long as they comply with existing regulations.
Jerome Powell stated that the Federal Reserve is reviewing its supervisory policies, which may have unintentionally made banks more hesitant to work with cryptocurrency companies.
He acknowledged that some banks have reacted to regulatory uncertainty with excessive caution, fearing potential risks. However, Powell also stressed that the unique nature of cryptocurrencies requires strict compliance with financial regulations to maintain stability and security.
We're not against innovation. And we certainly don't want to take actions that would cause banks to, you know, terminate customers who are perfectly legal just because of excess risk aversion, maybe related to regulation and supervision,
said Jerome Powell.
His statement underscored the Federal Reserve’s challenge of maintaining strict AML and BSA compliance while ensuring that legitimate innovation is not suppressed.
Powell’s willingness to review supervisory policies suggests that regulators may develop a framework that allows crypto companies access to banking services without compromising financial security. Achieving this balance could help legitimate businesses integrate into the banking system without facing unnecessary restrictions.
Powell’s Stance on a U.S. Central Bank Digital Currency (CBDC)
One of the key topics during Jerome Powell’s tenure has been the potential launch of a U.S. central bank digital currency (CBDC). While other major economies, including China, have already introduced pilot programs for digital versions of their national currencies, the Federal Reserve under Powell has taken a cautious and deliberate approach.
He has consistently stressed the need to study how a digital dollar would function, but he has avoided making any firm commitments on its adoption.
Jerome Powell has stated that issuing a U.S. central bank digital currency (CBDC) would require approval from Congress. He has also raised concerns about the impact of allowing citizens to hold direct digital accounts with the Federal Reserve. In his view, this change would significantly alter the U.S. financial system and should only move forward with broad public and political support.
During a Senate hearing on monetary policy and regulation on February 11, 2025, Sen. Bernie Moreno, R-Ohio, asked Powell directly:
Can I have your commitment that as long as you’re the chairman of the Federal Reserve system that we will never have a central bank digital currency?
Powell’s response was brief and decisive:
Yes.
Jerome Powell acknowledges the technological advancements behind CBDCs but has made it clear that the Federal Reserve will not introduce a digital dollar without Congressional approval. He emphasizes the need for thorough research and legislative backing before making any decisions.
Put simply, Powell insists that launching a CBDC should be a legislative decision, not just an initiative led by the Federal Reserve.
Crypto Regulation: Powell’s Deliberate Balancing Act
Jerome Powell has walked a fine line between skepticism and openness in the crypto space. While he originally dismissed Bitcoin as an unsuitable form of money, he later recognized that some digital asset innovations—such as stablecoins—could serve a useful purpose, provided they operate within a clear regulatory framework.
His caution is driven by concerns over potential fraud, systemic instability, and the Federal Reserve’s duty to safeguard the financial system. Yet, Powell has also underscored that legitimate crypto businesses deserve fair access to liquidity and banking services, signaling his willingness to support responsible industry regulation.
Few topics in finance are as contentious as the introduction of a U.S. digital dollar. Powell has made it abundantly clear that he will not push for a central bank digital currency (CBDC) without full congressional approval and public debate. His position underscores a critical point—CBDCs aren’t just another financial innovation; they represent a structural shift in how money is controlled and distributed.
In a larger sense, Powell’s stance embodies the financial world’s ongoing dilemma: the tension between the rapid acceleration of digital finance and the deeply ingrained caution of traditional regulatory institutions.
Under Powell’s leadership, the Federal Reserve has taken a measured approach to crypto. But is this a sign of prudent regulation or unnecessary hesitation? Many in the crypto space speculate whether his stance will shift in time or if meaningful progress will require a new Fed chair.
Powell’s track record reveals a complex balancing act—skepticism toward Bitcoin, cautious optimism on stablecoins, resistance to arbitrary financial exclusion, and a wait-and-see approach to CBDCs. Whether the Fed under his leadership will embrace digital assets or merely manage their risks, one thing is clear: his policies will shape the financial landscape for years to come.
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