Powell: Crypto Regulations Need Loosening, Stablecoin Compliance Enters Breakout Phase

5 min readApr 18, 2025

#Powell #Crypto #Trump

On April 16, Federal Reserve Chair Jerome Powell publicly acknowledged the importance of cryptocurrencies during a speech at the Economic Club of Chicago and reiterated the need for a comprehensive regulatory framework. Below are some of Powell’s key points:

The U.S. Congress and the Federal Reserve have reached a consensus on a legislative framework for stablecoins: Given the growing importance of crypto, it is essential to establish proper regulation.
The stablecoin legal framework should include consumer protection measures and ensure transparency.
The Federal Reserve is working with Congress on the legal framework for stablecoins. Although joint legislation previously failed, Powell stated that “things are changing” now that consensus has been reached.
Stablecoins are a form of digital product that may hold broad appeal.
As long as consumer protection and financial security are ensured, some regulatory guidance on crypto could be relaxed to support responsible innovation.

Powell’s public endorsement of stablecoins and the formation of a U.S. regulatory framework signals that the crypto payments industry is officially entering a “compliance breakout phase.” This policy shift not only breaks the long-standing regulatory deadlock but also redefines the underlying logic of crypto payments through institutional innovation, transitioning from chaotic growth to structured development within a regulatory framework.

Powell: We will aim to make adjustments that preserve the safety and soundness of the financial system

In his speech, Powell noted that U.S. banking regulators, including the Fed, have historically taken a conservative stance when issuing guidance on digital asset exposure. This, he stated, does not reflect the Fed’s original intent. He emphasized that the Fed has always believed it is reasonable for banks to serve legitimate crypto clients. In fact, so long as consumer protection and financial stability are guaranteed, regulatory guidance on crypto could indeed be relaxed to accommodate innovation and development in the sector.

He then dropped a major revelation: Crypto activity is already taking place within Fed-supervised banks.

Though these activities are confined within specific frameworks, this represents a monumental breakthrough — the first of its kind.

Three Milestones in U.S. Crypto Regulation

1. Legislative Level

The newly enacted Stablecoin Act requires issuers to obtain a federal license and maintain 1:1 USD reserve transparency. This marks the first time stablecoins have achieved legal standing equivalent to traditional money market funds.

2. Executive Level

Powell’s public speech about relaxing crypto regulations means that banks may now legally participate in stablecoin custody, transaction clearing, and related operations — paving the way for traditional financial institutions to enter the space.

3. Technological Level

The U.S. Treasury and SEC are jointly promoting a draft regulation requiring stablecoin issuers to connect to a central bank digital currency (CBDC) settlement bridge system. The goal is to incorporate stablecoins into the existing financial infrastructure, enabling real-time settlement with CBDCs and overcoming the current bottleneck of “final settlement” in cross-border payments.

Crypto Financial Infrastructure Undergoing Deep Compliance Restructuring

“Regulatory Coordination” Sparks Global Compliance Race

Powell’s speech sent a clear signal: the U.S. is no longer experimenting in isolation — it is building a systematic, scalable regulatory framework for crypto. This model could become a global standard for digital finance regulation. On one hand, the U.S. seeks to attract capital back home via regulatory clarity and to re-establish the dollar as a pricing anchor in crypto circulation. On the other, it’s pressuring the EU, Asia, and other financial hubs into a “compliance arms race.”

For example, Circle is preparing for an IPO while promoting a “compliance-first” narrative. USDC’s market share has quickly risen to 30%. This trend shows the market is actively responding to regulatory cues, prioritizing stablecoins that are regulated, liquid, and transparent. Tether (USDT), although still dominant by market cap, is facing growing scrutiny over compliance disclosures. This market divergence illustrates that regulation and growth are no longer mutually exclusive — they’re becoming dual engines for crypto finance.

2. Institutional Breakthroughs Reflect Financial Sovereignty Dynamics

This round of U.S. crypto compliance is more than just regulatory loosening — it’s a strategic response to the challenge of sovereign digital currencies. Following the launch of Project Hamilton and FedNow, the U.S. is leveraging stablecoins as a bridge to integrate CBDCs with digital assets.

This dual-track system allows traditional dollars and digital dollars to coexist, while using private-sector stablecoins to expand efficiency, user experience, and global payment reach. Against the backdrop of geopolitical financial restructuring, the relaxed U.S. regulatory posture serves to advance dollar internationalization — not simply to accommodate crypto.

3. Regulatory Shift from “Default Ban” to “Innovation Encouragement”

Looking back at 2022–2023, U.S. regulators were still cautious toward the crypto industry. The SEC’s emphasis on securities classification led to major compliance issues for top projects. Now, Powell’s remarks suggest that the Fed no longer treats crypto as inherently “high-risk” but is gradually integrating it into the financial system.

A key sign is the formal approval for banks to offer crypto customers accounts, clearing services, and custody. Banks that previously hesitated due to compliance fears may now lead a new wave of “crypto-friendly banking.” Payments giants like Visa and Mastercard have also resumed their stablecoin partnership plans — preparing for the next era of crypto payments.

4. Stablecoins: A Practical Path to a Digital Dollar

Powell had previously expressed a “cautiously open” stance on issuing a CBDC. But this time, by clearly stating that “stablecoins hold broad appeal,” he is essentially signaling that they offer a viable path to dollar digitalization. Compared to building a CBDC from scratch, stablecoins already benefit from established user bases, mature technologies, and high market acceptance.

Through licensing regulation, integration with central bank settlement infrastructure, and operational transparency, stablecoins could replace traditional cross-border payments within five years — emerging as the practical version of a “digital dollar.”

Conclusion: Policy Watchpoints in the Next Phase

The following key developments are worth close attention:

Progress of Circle’s IPO and USDC’s market performance — will it attract more compliant projects?
Public testing of the Fed and Treasury’s CBDC bridge technology — can it drive full banking system integration?
Whether the SEC shifts from “enforcement-led” to “compliance-guided” policymaking — critical for long-term regulatory clarity.

It’s now evident that U.S. crypto regulation has transitioned from “tight control” to “system optimization.” As a bridging asset, stablecoin compliance not only determines its own fate but also steers the direction of the entire crypto financial ecosystem.