Main Points:
- Fed Chair Jerome Powell confirms U.S. banks are free to provide services to cryptocurrency firms, as long as safety and soundness are maintained.
- The U.S. Senate passed the GENIUS Act, establishing a federal regulatory framework for stablecoin issuance and use.
- The Federal Reserve removed “reputational risk” from bank supervisory materials, easing de-banking concerns for crypto companies.
- Stablecoin adoption is accelerating, with major payment networks and corporations integrating digital dollars into their platforms.
- Bitcoin’s price held above $106,000 following Powell’s testimony, reflecting market confidence in clearer regulatory signals.
Powell’s Testimony and Crypto Clarification
On June 24, 2025, Federal Reserve Chair Jerome Powell testified before the House Financial Services Committee, delivering his semiannual monetary policy report. While much of his prepared remarks reiterated the Fed’s patient stance on interest rates, he also addressed questions regarding the banking sector’s relationship with the cryptocurrency industry. Powell emphasized that the Federal Reserve does not dictate which customers banks may serve; instead, individual banks have the discretion to decide whether to onboard crypto firms.
When pressed on whether banks could offer services to digital-asset companies or participate in crypto activities, Powell responded unequivocally: “Banks are free to provide banking services to the crypto industry and crypto companies, and banks are also free to conduct crypto activities as long as they do so in a way that is protective of safety and soundness”. This clarification marks a significant policy signal, countering the de-risking trend that had left many crypto enterprises stranded without access to traditional banking services.
GENIUS Act: A Federal Stablecoin Framework
Just days prior, on June 18, the U.S. Senate voted 63–30 to pass the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins of 2025), marking the first major federal legislation to regulate stablecoins. Under the GENIUS Act, stablecoin issuers must fully back their tokens with liquid assets—be it U.S. dollars or short‐term Treasury bills—on a 1:1 basis, and provide regular financial disclosures to regulators. Large issuers with market capitalizations above $50 billion are also required to undergo annual independent audits.
By mandating robust reserve requirements and transparency measures, the GENIUS Act aims to bolster confidence in payment-oriented stablecoins while safeguarding consumers against issuer insolvency risks. In the event of an issuer’s bankruptcy, the legislation prioritizes stablecoin holders for redemption before other creditors, reducing the likelihood of sudden runs that could destabilize the broader financial system.
Elimination of Reputational Risk in Bank Examinations
In parallel with Powell’s testimony, the Federal Reserve announced on June 23 that it would remove “reputational risk” considerations from its bank supervisory manual. This change follows similar moves by the Office of the Comptroller of the Currency and signals a regulatory pivot away from non-quantitative risk factors that were accused of being used to pressure banks not to serve crypto clients.
Powell noted that over the course of 2024, the Fed recognized the reputational risk standard had inadvertently contributed to de-banking in the crypto sector. By excising this criterion, regulators intend to ensure that decisions about customer relationships rest solely with banks, guided by traditional safety and soundness metrics rather than political or reputational concerns.
Stablecoin Market Momentum
Stablecoins have emerged as a crucial bridge between traditional finance and decentralized networks, facilitating instant settlement and global remittances at lower costs. Following the GENIUS Act’s passage, market participants have doubled down on integrating stablecoins into payment rails. Meta announced pilot programs enabling USDC transactions within messaging apps, while Visa and Mastercard expanded their stablecoin-linked settlement services for merchant acquirers.
On the regulatory front, the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) are coordinating with banking regulators to finalize oversight rules, ensuring a cohesive approach across agencies. Meanwhile, private-sector initiatives such as the Hyperledger Foundation’s Project Vault are exploring ledger-based clearinghouses that leverage stablecoins for cross-border settlements, promising further efficiency gains and reduced counterparty risk.
Market Reactions and Bitcoin Price Response
Financial markets reacted positively to Powell’s reassurances and the stablecoin framework’s clarity. Bitcoin, considered a bellwether for risk-on sentiment in digital assets, stabilized above $106,000 in the hours following the hearing, with trading volumes spiking by over 20% on major exchanges. Traders cited reduced uncertainty over banking relationships and clearer stablecoin regulations as key drivers behind the rally.
Institutional interest also appears to be rising. Custodial service providers such as Fidelity Digital Assets and Coinbase Prime reported a 15% increase in inquiries from traditional hedge funds and family offices seeking on-ramps to crypto markets. Many see the Fed’s stance as a green light for integrating digital-asset strategies into conventional portfolios, particularly those focused on yield generation and hedging against dollar debasement.
Practical Implications for Blockchain Integration
For businesses and developers in the blockchain space, the twin developments of freed bank access and stablecoin regulation unlock new possibilities:
- On-Ramp and Off-Ramp Solutions: Payment processors can now partner with banks without fear of regulatory pushback, streamlining fiat-crypto conversions for retail and enterprise clients.
- Enterprise Blockchain Projects: Corporations exploring tokenization of assets—be it securities, supply-chain credits, or loyalty points—gain confidence in leveraging regulated stablecoins for settlement and collateral.
- DeFi Innovation: Decentralized finance protocols can integrate regulated stablecoins as liquidity pools’ base assets, reducing the risk of sudden capital flight during volatility.
- Cross-Border Payments: Fintechs serving remittance corridors can scale operations by combining bank partnerships with existing blockchain networks, lowering costs for end users in emerging markets.
By clarifying that banks are free to offer crypto services under existing safety and soundness standards, the Fed removes a major barrier to mainstream blockchain adoption. Coupled with rigorous but clear stablecoin rules, these measures pave the way for deeper integration between legacy finance and decentralized systems.
Conclusion
Jerome Powell’s Congressional testimony on June 24, 2025, and the Senate’s passage of the GENIUS Act mark pivotal moments in the evolution of U.S. crypto policy. By affirming banks’ autonomy in serving crypto firms and establishing a robust legal framework for stablecoins, regulators have signaled a willingness to embrace digital-asset innovation while maintaining financial stability. The removal of reputational risk from bank examinations further cements this pro-innovation stance. For investors and practitioners seeking new crypto assets, revenue streams, and practical blockchain applications, these developments offer a clearer path forward: traditional institutions and decentralized networks can now collaborate more seamlessly, unlocking the next wave of growth in the digital-asset ecosystem.
