Federal Reserve Chair, Jerome Powell, signaled possible easing of crypto rules for banks, noting the sector’s growing mainstream presence despite past issues.

He acknowledged that, despite a history of failures and fraud in the sector, cryptocurrencies are becoming more mainstream.

Powell emphasized the need to support innovation while ensuring consumer protection and banking system stability.

Last month, the Federal Deposit Insurance Corporation announced plans to withdraw older guidance, clarifying that banks can engage in certain crypto-related activities without prior approval.

The Office of the Comptroller of the Currency had also confirmed that crypto activities are permissible within the federal banking framework.

🔗 Source: The Block

🧠 Food for thought

1️⃣ Banking-crypto relationship follows a pendulum pattern of restriction and openness

The current regulatory shift under the Trump administration represents the latest swing in a longer historical pattern of banking engagement with digital assets.

After major crypto exchange failures in recent years, U.S. banking regulators adopted a notably cautious stance, creating significant barriers for cryptocurrency firms seeking banking services 1.

This “de-risking” trend led many legitimate crypto businesses to struggle with basic banking access, as financial institutions feared regulatory scrutiny 2.

Powell’s acknowledgment of previous “conservative” regulatory guidance aligns with documented policies that discouraged banks from crypto engagement despite no explicit prohibitions.

The pendulum is now swinging back, with Trump’s Executive Order specifically promoting innovation in digital assets and ensuring banking access for legitimate firms 2.

This cycle mirrors previous technological transitions in finance, where initial regulatory caution eventually gives way to frameworks that accommodate innovation while managing new risks.

2️⃣ Stablecoin regulation emerges as the test case for broader crypto framework

Stablecoins have become the regulatory priority and testbed for how digital assets might be integrated into the traditional financial system.