Al Drago/Photographer: Al Drago/Bloomberg
Federal Reserve Chair Jerome Powell said examiners should not be encouraging banks to drop law-abiding customers simply because they own or deal in cryptocurrencies.
“We’re not against innovation,” Powell said. “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.”
Powell’s remarks, delivered during his Federal Open Market Committee press conference on Wednesday, come as
President Donald Trump called out the CEOs of JPMorgan Chase and Bank of America by name last week, accusing their institutions of stripping bank accounts from conservatives. The Bank Policy Institute issued
Powell said banks are “perfectly able” to serve crypto customers in ways that comply with anti-money-laundering and Bank Secrecy Act requirements, and many do so appropriately. But, he noted, that the threshold for issuing coins or transacting directly with digital assets are higher.
“That’s because they’re so new, and if you’re making a choice to conduct that activity in a bank, which is inside the federal safety net with deposit insurance, then you want to be pretty sure that that is safe and sound activity,” he said.
Powell declined to comment on whether cryptocurrencies were beneficial to the financial system or whether consumers should invest in them, but noted that the matter would benefit from congressional action.
“I do think it would be helpful if there were a greater regulatory apparatus around crypto,” he said. “And I think that’s something Congress was working on quite a lot. We’ve actually spent a lot of time, you know, with House Financial Services, working together with them on various things, and I think that would be a very constructive thing for Congress to do.”
No contact with Trump
Powell went to lengths to avoid responding directly to comments made or actions taken by Trump in recent weeks.
Powell said he has had “no contact” with Trump and noted that having a tit-for-tat with the president would only undermine the Fed’s credibility.
“The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals and really keeping our heads down and doing our work,” he said. “That’s how we best serve the public.”
Powell said the Fed is reviewing Trump’s various executive actions, including those related to diversity, equity and inclusion, or DEI, programs, to determine what steps the institution should take. He declined to say whether adherence to such orders would be mandatory for the central bank or voluntary. This is a debated topic, given the Fed’s status as an independent agency not directly accountable to any executive department.
“It’s been our practice, as I mentioned, to work to align our policies,” Powell said. “For those that are mentioned, I’m just going to leave it with that … I’m not going to go any deeper than that or get into any deeper set of issues.”
QT running smoothly
The FOMC opted to make no changes to its monetary policy stance this week, holding the federal funds rate steady at a target range between 4.25% and 4.5%. The group also maintained the pace of its balance sheet runoff.
Powell said the balance sheet reduction effort, also known as quantitative tightening, or QT, was proceeding smoothly. He noted that the level of reserves — funds held by commercial banks at the Fed for liquidity and transaction settlement purposes — remain roughly unchanged since QT began.
Thus far, the shedding of assets from the Fed’s balance sheet has led to the reduction of liabilities rather than reserves. Most of this has taken place within the overnight reverse repurchase agreement, or ON RRP, program.
Powell said the goal is to continue QT until reserves are “somewhat above ample.” Currently, they are well above ample, a range also known as abundant.
“We’re closely monitoring a range of indicators to assess conditions and that should provide signals when reserves are approaching a level that could be judged as ‘somewhat above ample,'” he said, noting that there are no set dates for slowing the pace of runoff nor a firm target dollar amount for Fed liabilities. “We stand ready to take appropriate action to support the smooth transmission of monetary policy, including to adjust the details of our approach for reducing the size of our balance sheet in light of economic and financial developments.”