Cryptocurrency Policy Faces Dual Challenges as Fed Independence Debate and Senate Legislation Stall

Trump Maintains Fed Chair Amid Criminal Investigation

President Donald Trump stated he has no immediate plans to terminate Federal Reserve Chair Jerome Powell, despite an ongoing Department of Justice criminal investigation into the central bank leader. When asked directly about removing Powell, Trump told Reuters he lacks such intentions but added that the situation remains fluid ^[1].

"Right now, we're in a little bit of a holding pattern with him, and we're going to determine what to do. But I can't get into it. It's too soon. Too early," Trump stated when questioned whether the investigation provided grounds for dismissal ^[1].

The president revealed plans to nominate Powell's replacement within weeks, expressing preference for former Fed Governor Kevin Warsh or National Economic Council Director Kevin Hassett. "The two Kevins are very good," Trump noted, adding that an announcement would come "over the next couple of weeks" ^[1].

Powell's position as Fed chief concludes in May, though his board of governors seat extends until 2028. Under federal law, Fed governors can only be removed for cause rather than policy disagreements ^[1].

Central Bank Independence Under Pressure

The DOJ probe stems from a renovation project and Powell's congressional testimony regarding it, according to Powell's statements earlier in the week when he disclosed that grand jury subpoenas had been served to the central bank ^[1].

In a video statement, Powell characterized the investigation as a pretext for broader political pressure regarding interest rates. "This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions or whether instead monetary policy will be directed by political pressure or intimidation," he said ^[1].

Trump has publicly criticized Powell over interest rate policy, arguing that recent consumer price index data for December justifies rate reductions. "We have very low inflation. That would give 'too late Powell' the chance to give us a nice, beautiful, big rate cut," Trump told reporters before traveling to Detroit for an economic event ^[1].

The president dismissed widespread concerns among analysts, investors, and policymakers that undermining central bank independence could damage the dollar and trigger inflation, repeatedly stating "I don't care" ^[1].

Senate Cryptocurrency Legislation Hits Roadblock

Separately, efforts to establish comprehensive cryptocurrency regulation encountered significant obstacles when Senate Banking Committee leadership abruptly canceled a scheduled Thursday markup session for digital asset legislation ^[2].

The postponement followed Coinbase's withdrawal of support for the draft bill late Wednesday. The largest U.S.-based crypto exchange raised objections regarding stablecoin rewards programs and what it perceived as excessive Securities and Exchange Commission authority ^[2].

Coinbase CEO Brian Armstrong asserted that banks are attempting to "kill their competition" through the legislation, arguing that "crypto companies should be allowed to compete and offer loans just like banks" ^[2].

The proposed legislation would divide regulatory oversight of digital assets between the SEC and the Commodity Futures Trading Commission ^[2].

Negotiations Continue Despite Setback

U.S. Senate Democrats and cryptocurrency industry representatives scheduled renewed discussions for Friday, according to sources familiar with the plans ^[2]. The call will include Democrats from both the Senate Banking Committee and Senate Agriculture Committee, which oversees the CFTC, alongside crypto policy advocacy groups ^[2].

Senator Cynthia Lummis expressed optimism despite the delay, writing on social media that lawmakers were "closer than ever" to reaching agreement and looked forward to "partnering with [Chairman Scott] to deliver a bipartisan bill the industry — and America — can be proud of" ^[2].

Senator Bill Hagerty similarly maintained confidence that consensus could be achieved "in short order," stating his commitment to "passing legislation that ensures this innovative technology flourishes in the United States for decades to come" ^[2].

Kraken co-CEO Arjun Sethi urged lawmakers to continue negotiations, warning that abandoning efforts would worsen regulatory uncertainty. "Walking away now would not preserve the status quo in practice," Sethi posted. "It would lock in uncertainty while the rest of the world moves forward" ^[2].

A central dispute involves whether stablecoin issuers should be permitted to offer rewards or yield programs, drawing opposition from bank lobbyists and some Democrats concerned about consumer protection and competition with traditional deposits ^[2].

The Senate Agriculture Committee still plans to conduct a hearing on the legislation January 27 ^[2].