As President Donald Trump continues to explore the boundaries of executive power within U.S. government agencies, the cryptocurrency sector seems to be caught in the crossfire of a significant confrontation with the Federal Reserve. This conflict centers around the Fed’s declared objective of maintaining its independence in monetary policy.
### The Fed’s Historic Role
Since the 1950s, the Federal Reserve has held the ultimate authority over critical aspects of the American banking system and monetary policy. However, the Trump administration, along with its Republican allies in Congress, is now seemingly focused on encroaching upon that authority, particularly through various initiatives related to cryptocurrency.
### Potential Policy Shifts for Crypto Banks
Reports indicate that the White House is preparing to announce a new executive order aimed at the cryptocurrency sector. This order is expected to instruct the Federal Reserve to reconsider its stance on granting master accounts to crypto banks—financial institutions that hold banking licenses while providing cryptocurrency custody services. Access to master accounts is vital for these banks, as it enables them to utilize the Fed’s financial services effectively. The approval of such accounts for crypto banks would mark a significant milestone for the digital assets industry, particularly for those like Kraken Financial and Caitlin Long’s Custodia, which are already recognized as depository institutions.
### Federal Reserve’s Decision-Making Process
For many years, the approval of master accounts has been the purview of the Fed’s board of governors. Although these governors are appointed by the president, their autonomy has historically been respected, following an informal agreement from 1951 that ensured their independence in policymaking. However, last month, Trump initiated steps to challenge this autonomy by signing an executive order that asserts his authority to influence the Fed’s policies regarding the regulation of financial institutions—a category that would encompass decisions about master accounts.
### Legislative Movements in Support of Cryptocurrency
While Trump’s executive order allows the Fed to maintain control over its monetary policy, including sensitive issues like interest rates, there are growing efforts in Washington to challenge even that independence, particularly through the lens of cryptocurrency. Recently, Senator Cynthia Lummis (R-WY) introduced the Bitcoin Act, which proposes that the U.S. government acquire approximately $80 billion in Bitcoin to establish a federal Strategic Bitcoin Reserve. This acquisition would primarily be funded by a plan to reissue Nixon-era gold certificates at current market values, capitalizing on the significant appreciation of gold over the years.
### New Dynamics in Congressional Strategy
A source familiar with the discussions surrounding the Bitcoin Act revealed that this approach to funding has not been attempted before, primarily due to a long-standing reluctance among lawmakers and presidents to explicitly direct the Federal Reserve. However, this perspective appears to be evolving. According to the source, the prevailing sentiment among supporters of the Bitcoin Act aligns with Trump’s view that independent agencies are not beyond the reach of congressional oversight.
### Historical Context of Presidential Pressure on the Fed
It’s essential to note that Trump is not the first president to challenge the independence of the Federal Reserve. Historically, various presidents have pressured the Fed to adjust or abandon specific policies. An infamous example includes President Lyndon Johnson, who reportedly confronted Fed Chairman William McChesney Martin physically over a disagreement regarding interest rates. Despite this history, no president since the 1950s has successfully reclaimed significant decision-making authority from the Fed’s governors.
### Implications for the Cryptocurrency Sector
If Trump and his Republican allies persist in their efforts to alter the Fed’s role—especially through initiatives centered on cryptocurrency—this could provoke varied reactions within the digital assets community. One lobbyist suggested that the administration may be using crypto policy as a “test case” for reasserting control over independent agencies. While this could lead to unprecedented achievements for the crypto sector, it also risks embroiling the industry in contentious legal battles and potentially aligning it with a politically charged agenda that tests constitutional boundaries.
The lobbyist expressed uncertainty about the implications of these developments but acknowledged the opportunity they present, saying, “I can’t tell yet if it’s a good thing or a bad thing. But we’ll take it. Right?”
