The recent Federal Open Market Committee (FOMC) meeting on January 29, 2025, and Federal Reserve Chair Jerome Powell’s subsequent comments have significant implications for stablecoins and the broader crypto market – said Brava, in a company’s blog.
„banks are perfectly able to serve crypto customers as long as they understand and can manage the risks.” – Powell
This cautious openness suggests that the Fed is not opposed to integrating cryptocurrencies, including stablecoins, into the traditional banking system. However, Powell also noted that the threshold for banks engaging in crypto activities has increased due to their novelty.
The Fed’s stance on stablecoins should be viewed in the context of recent policy shifts. On January 23, 2025, President Trump issued an Executive Order to strengthen US leadership in digital financial technology. This order promotes the development and growth of lawful and legitimate dollar-backed stablecoins worldwide, significantly departing from previous approaches.
The Executive Order’s emphasis on private sector stablecoins to promote and protect the dollar’s sovereignty contrasts with some other countries’ preference for Central Bank Digital Currencies (CBDCs). This policy shift is likely to positively impact USD-backed stablecoins, potentially increasing their adoption and use in the financial system. However, regulatory challenges remain. The Executive Order does not clarify a legislative solution governing stablecoins in the United States. Powell acknowledged the industry’s regulatory challenges and suggested that „a greater regulatory apparatus” from Congress would be helpful.
The Fed’s approach to stablecoins is also influenced by concerns about their potential use in sanctions evasion. There is evidence that sanctioned actors increasingly rely on stablecoins for illicit activities. As a result, regulators are likely to increasingly emphasize the need for stablecoin issuers and associated parties to undertake ecosystem monitoring and due diligence to detect and act against sanctions-related risk.
Finally, while the Fed cautiously supports stablecoins, there is still room for growing doubt about using blockchain for complete financial transactions. In retrospect, this FOMC might signal an increased activity in developing a formal digital asset regulatory framework, with collaboration between industry participants and regulators.
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Brava is an automated stablecoin yield management platform designed to simplify access to yield opportunities in decentralized finance (DeFi). By leveraging risk-adjusted strategies and automation, Brava empowers users to optimize their yield strategies while maintaining full control of their assets.
Banking 4.0 – „how was the experience for you”
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Many more interesting quotes in the video below:
