In a recent testimony before the Senate Banking Committee, Federal Reserve Chairman Jerome Powell acknowledged the potential for productive innovation in the cryptocurrency and blockchain space. However, he also warned of the industry’s ongoing issues with fraud, lack of transparency, and risk. Powell urged caution for financial institutions in their interactions with crypto, and welcomed the possibility of Congress creating a new legal framework for the industry. Meanwhile, American regulators have been increasingly aggressive towards the crypto space after several high-profile failures, with the SEC cracking down on crypto companies and institutions dealing with them. The recent troubles faced by crypto-friendly bank Silvergate, which suffered a bank run following the collapse of FTX and sold $5.2 billion of debt securities at a significant loss, could potentially spill over into the traditional finance industry, given the bank’s loans from the Federal Home Loan Banks.
