The Federal Reserve signaled on Wednesday that U.S. banks should not be barred from engaging with the crypto industry, whether by serving customers or developing new services. During a press conference, Fed Chair Jerome Powell emphasized that the central bank is “not against innovation” and that “banks are perfectly able to serve crypto customers, as long as they understand and can manage the risks.”
“A good number of our banks that we regulate and supervise do that,” Powell noted. However, he acknowledged that “the threshold has been a little higher for banks engaging in crypto activities.”
His remarks come as the House of Representatives launches an inquiry into an alleged effort known as “Operation Choke Point 2.0.” When asked whether speculation in an unregulated asset class could pose risks to American households, Powell addressed the matter directly.
The phrase “Operation Choke Point 2.0,” referencing a similar Obama-era initiative, was widely circulated by Nic Carter, a partner at Castle Island Ventures. In a post on X, Carter described Powell’s comments as an “immense shift,” suggesting they effectively put an end to the supposed crackdown.
Paul Grewal, Chief Legal Officer at Coinbase, also welcomed Powell’s statement. “What a change from the last four years,” he told Decrypt in an email. “What I hear Jay Powell saying is: Banks are now free to manage any risks from crypto, just like they manage any risks from any other industry.”
The ongoing House investigation, led by Republicans, seeks to determine whether certain individuals and businesses were unfairly cut off from banking services under the Biden administration due to their industry ties.
Jerome Powell acknowledged the risks associated with crypto customers but argued they should not be excluded outright. “We certainly don’t want to take actions that would cause banks to terminate customers who are perfectly legal, just because of excess risk aversion [that’s] maybe related to regulation,” he stated.
At the same time, he cautioned banks looking to engage with crypto directly, warning that the asset class remains relatively new. “If you’re making a choice to conduct [crypto] activity inside a bank, which is inside the federal safety net with deposit insurance, then you want to be sure that it’s safe and sound,” Powell explained.
In September, former SEC Chair Gary Gensler testified before Congress that he had “never heard that term” in reference to Operation Choke Point 2.0. Shortly after his recent departure from the agency, the SEC withdrew Staff Accounting Bulletin (SAB) No. 121—a policy introduced in March 2022 that required banks to classify digital assets as liabilities on their balance sheets, discouraging crypto involvement.
Meanwhile, documents obtained by Coinbase through the Freedom of Information Act revealed that the Federal Deposit Insurance Corporation (FDIC) had pressured banks to limit crypto services in at least 23 instances since March 2022.
One letter cited concerns over a “Bank Digital Deposit” program that utilized a public blockchain, while another urged a bank to “pause all crypto asset-related activity” as it sought to introduce a Bitcoin trading service.
Though the House investigation remains in its early stages, the idea of a coordinated effort against crypto is gaining attention.
In November, Marc Andreessen, co-founder of venture capital firm Andreessen Horowitz, claimed on The Joe Rogan Experience podcast that he personally knew 30 tech founders who had been debanked.
