Fed Chair Jerome Powell Signals Easing in Crypto Regulations Amid Steady Interest Rates

Jerome Powell signalled potential easing of crypto banking regulations but indicated that interest rates are unlikely to be cut soon. Market expectations for a May rate reduction have fallen, with investor discontent evident. Powell discussed the maturation of the crypto sector while reinforcing the Fed’s cautious approach to economic policy amidst uncertainties.

Federal Reserve Chair Jerome Powell indicated that there may be a partial relaxation of crypto banking regulations during his address at the Economic Club of Chicago. However, he also cautioned that a reduction in interest rates is unlikely in the near term, amidst ongoing economic uncertainties influenced by trade policies.

Market reactions reflected this stance, as investor sentiment shifted negatively following Powell’s insights. According to CME FedWatch, the likelihood of a May interest rate cut has dropped to merely 16%. The equity market experienced a slight decline, revealing disappointment in the absence of dovish signals.

Powell emphasised the need for patience in policy-making, stating, “We should not rush to lower interest rates.” He advocated for further economic clarity before reassessing any changes in Federal Reserve policies. Despite prevailing risk-off sentiments, the cryptocurrency market remained resilient, with Bitcoin hovering near $84,500.

In his comments on digital assets, Powell remarked on the increasing popularity of cryptocurrencies and expressed support for establishing a legal framework for stablecoins. He noted that the Federal Reserve is in favour of relaxing certain banking regulations due to the maturing nature of the crypto sector, advocating for more defined oversight rather than restrictions.

The mixed signals from Powell—no immediate policy leniency but positive regulatory perspectives for cryptocurrency—resulted in a muted response from digital asset markets. He highlighted potential economic slowing in early 2025, attributing some uncertainty to President Trump’s tariffs and noted that quantitative tightening is ongoing, with the Fed poised to make difficult decisions if inflation resurfaces.

While reaffirming its commitment to provide dollar liquidity to global central banks if required, Powell rejected the notion of a Fed “put,” emphasizing that the central bank’s independence is legally mandated. For the crypto sector, the regulatory insights provided a glimmer of hope amid a predominantly hawkish macroeconomic environment.