Jerome Powell, the chair of the Federal Reserve, has hinted at a potential shift away from the widely criticized practice of de-banking crypto-related entities that gained prominence during the Biden administration.
Referred to as ‘Operation ChokePoint 2.0 (OCP 2.0)’, the alleged widespread limitation of banking services offered to crypto companies attracted the attention of the new Trump administration, leading to an official investigation.
Nevertheless, during a recent press conference, Powell clarified that banks are now capable of serving crypto clientele while implementing appropriate risk management strategies. In his words,
“Banks have the capability to accommodate crypto customers as long as they are knowledgeable about and can mitigate the associated risks […] we are supportive of innovation.”
Furthermore, he added,
“We do not wish to take actions that would result in banks terminating clients who are operating within the bounds of the law merely due to excessive risk aversion possibly stemming from regulatory concerns.”
A Promising Future for Crypto Enthusiasts?
Nic Carter, a co-founder at Castle Island Ventures and a vocal critic of OCP 2.0, has often implicated the Federal Reserve as a key player in the extensive de-banking of the sector.
However, following Powell’s recent statement, Carter now believes that the era of restrictions has come to an end. He expressed his views by stating,
“A significant shift in tone. The chapter of OCP 2.0 has concluded. This is particularly significant given that, to my knowledge, the Federal Reserve played a central role in OCP 2.0.”
Providing context, in a recent interview on the ‘Joe Reagan Experience’, Marc Andreessen, the co-founder of a16z, highlighted that 30 technology entrepreneurs had encountered de-banking over the past four years.
James Comer, the Chairman of the House Committee on Oversight and Government Reform, is actively investigating the issue. Consequently, this shift is a relief for many tech startups, including those involved in the crypto space.
Paul Grewal, the Chief Legal Officer at Coinbase, characterized Powell’s statement as a ‘shift’ from the previous administration. He remarked,
“My understanding of Jay Powell’s statement is that banks are now permitted to assess risks associated with crypto in the same manner they do for any other industry. This marks a significant departure from the past four years.”
Furthermore, the recent repeal of the contentious SEC accounting guidance SAB 121, which prohibited the inclusion of crypto assets in companies’ financial reports, signifies further positive developments.
These combined advancements have the potential to spur increased adoption of cryptocurrencies in the United States.