Crypto Wins Big: Fed Chair Ends Banking Freeze

• Crypto firms get banking breakthrough as Fed chief signals new openness.
• Powell: Banks “perfectly able” to serve digital asset with proper risk controls.
• Bitcoin jumps 3% as Fed stance marks shift from “Operation Choke Point.”

Money talks, but now crypto might get a seat at a traditional banking table. Federal Reserve Chair Jerome Powell has hinted at a possible improvement in the relationship between banks and digital asset firms. His message was clear: “Banks are perfectly able to serve crypto customers as long as they can understand and service the risks.” 

Powell stressed that under the FED’s purview, banks have to ensure that their clients’ activities are “safe and sound.” He acknowledged that the regulatory threshold for banks participating in crypto activities is higher due to the novelty and evolving risks of the sector. Powell clarified that the Fed is not against innovation and does not intend to cause banks to terminate legal customer relationships purely out of regulatory concerns.

His remarks triggered a rally in Bitcoin’s prices, which are up by 3% in the last 24 hours. The FED’s recent statement comes amidst heated debates on the debanking (and “de-risking”) stance. Simply put, debanking occurs when a bank terminates its banking relationship with a client, effectively excluding them from the banking system.

Source: a16z

This practice impacted the crypto industry when the government issued subpoenas to the banks and payments companies serving crypto businesses in 2013. Many industry experts termed this “Operation Choke Point 2.0.”

SEC vs. Crypto: A Regulatory Retreat?

That said, the SEC officially repealed the Staff Accounting Bulletin or SAB 121, the controversial rule that mandated firms holding crypto assets on behalf of users to classify them as liabilities on their balance sheets. This groundbreaking move marks a significant victory for the digital asset industry and could transform how traditional banks interact with digital assets.

While Powell’s unexpected openness to crypto has captured market attention, investors await the FED’s next move on interest rates. A dovish shift, signaling potential rate cuts, could unlock liquidity into the market, triggering a widespread crypto rally.  

Powell walked a tightrope between acknowledging mounting pressure for rate cuts and maintaining the Fed’s independence. The other day, President Trump declared that “interest rates will drop immediately.” To which Powell pointedly declined stating, “I am not going to have any response or comment whatsoever on what the President said. It’s not appropriate for me to do so.”

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