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Fed Chair Jerome Powell said cryptocurrency confirmed that banks can still work with crypto customers — if they manage the risks properly.

On Jan. 30, in a press conference, Powell addressed concerns from the Financial Stability Oversight Council’s annual report, which flagged cryptocurrency as a potential financial risk.

“Banks are perfectly able to serve crypto customers, as long as they understand and can manage the risks, and it’s safe and sound,” Powell said. “The threshold has been a little higher for banks engaging in crypto activities, and that’s because they’re so new. “

Powell added that the Fed is not against innovation but wants to prevent banks from feeling forced to cut off crypto businesses due to regulatory pressure.

“We certainly don’t want to take actions that would cause banks to terminate customers who are perfectly legal just because of excess risk aversion,” he said.

Powell noted that individual investors need better protection, as many do not fully understand the risks of investing in cryptocurrencies. He compared crypto to stocks and mutual funds, saying that similar consumer safeguards should apply.

Congress needs to step up on crypto regulations

Powell also urged Congress to establish clearer rules for crypto, noting that lawmakers are already working on related policies.

“I do think it would be helpful if there were a greater regulatory apparatus around crypto. And I think that’s something Congress was working on quite a lot,” Powell said. “We’ve actually spent a lot of time with members of Congress, working together with them on various things. And I think that would be a very constructive thing for Congress to do.”

Fed holds rates steady, markets react

As expected, the Federal Reserve kept its benchmark interest rate at 4.25% to 4.50%, marking the first pause since the Fed began cutting rates last September.

The language on inflation was more cautious, removing last month’s mention of progress toward the 2% target.

Following his remarks, both Bitcoin and stocks rebounded, with Bitcoin rising above $104,000 by the end of the conference.