Powell boosts warning on Crypto industry and its ‘turmoil’

Powell on Tuesday laid out a series of concerns he has with crypto, and said lenders the regulator oversees must be “taking great care” when engaging with it. He added that the central bank didn’t want to prevent innovation.

“We don’t want regulation to stifle innovation in a way that just favors incumbents and that kind of thing,” he said during a hearing before the Senate Banking Committee. “But, like everyone else, we’re 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.”

American bank regulators have taken an increasingly aggressive posture on digital assets since the crypto exchange FTX failed last year. The Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. on Jan. 3 issued a blunt declaration stating crypto-related risks that can’t be controlled shouldn’t be allowed to migrate to the banking system. 

During Tuesday’s hearing, Powell was also peppered with questions about the regulator’s ongoing review of bank-capital requirements. 

The amount of money that banks need to set aside has become a hot-button issue in Washington. Executives have been arguing that capital requirements stemming from stress tests can have an undue negative impact on their businesses. 

In December, Michael Barr, the Fed’s vice chair for supervision, said that the regulator was taking into account new forms of financial stress as part of a broad look at lenders’ capital requirements.

When asked about the review on Tuesday, Powell said that changes would be specific to institutions that the central bank oversees. “We’re very strongly committed to tailoring,” he said. 

This story has been published from a wire agency feed without modifications to the text.