Warren urges Jerome Powell to reject cryptocurrency bailouts
Sen. Elizabeth Warren urged federal reserve Chair Jerome Powell and the U.S. Treasury to rule out any rescue of cryptocurrency markets in a Wednesday letter, as reported by crypto-bailout” target=”_blank” rel=”nofollow noopener”>American Banker. The request focuses on preventing the use of public resources to stabilize digital-asset prices or to rescue failing crypto firms.
She also asked both agencies to provide a written pledge committing to no cryptocurrency bailouts, according to Law360. Her letter frames the issue as taxpayer protection following sharp market swings and recurring losses tied to platform failures and fraud.
Why a no-crypto-bailout stance matters for taxpayers now
A formal no-bailout stance seeks to reduce moral hazard by making clear that private investors, not taxpayers, bear crypto risk. It would also limit expectations that emergency public tools designed for banking crises could be redirected to digital-asset markets.
Under current frameworks, the Federal Reserve’s emergency lending is targeted to regulated entities and secured by eligible collateral, while crypto tokens are outside deposit insurance and traditional safety nets. That distinction is central to how any distress would be absorbed by private markets rather than the public balance sheet.
In explaining the rationale, Warren emphasized the taxpayer dimension. “We urge you to rule out a taxpayer-funded bailout for cryptocurrency billionaires,” said Sen. Elizabeth Warren in a Feb. 19 letter to Powell and Treasury Secretary Scott Bessent, per a Senate Banking Committee release.
Policy signaling can influence risk appetite across digital assets and related equities. Industry figures counter that crypto operates without government backstops; Binance co-founder Changpeng “CZ” Zhao argued that the sector does not rely on rescues, as reported by Benzinga.
For banks and supervisors, the near-term focus is on exposures rather than token prices. Powell has flagged concerns about “debanking” of lawful crypto clients and noted stablecoins could play a role if placed under robust rules, as reported by CoinDesk.
At the time of this writing, Coinbase Global (COIN) traded around $168 in overnight activity, based on data from Yahoo Finance. Price context is not a recommendation and may differ from regular-session prints.
On jurisdictional limits, former Treasury Secretary Janet Yellen has said the department lacks authority to rescue decentralized cryptocurrencies like Bitcoin absent new law, as summarized by The Currency Analytics. That boundary implies market losses would generally remain private unless Congress expands the toolkit.
What counts as a crypto ‘bailout’ under U.S. policy
Direct asset support vs. emergency lending to banks with exposure
Direct support would include buying crypto assets, guaranteeing token prices, or capitalizing a failing crypto platform, actions that push public money into the market. By contrast, Fed emergency lending can provide liquidity to banks or eligible firms with approved collateral, indirectly easing stress without purchasing crypto itself.
Guarantees, supervisory forbearance, and indirect market backstops
Guarantees can include extending protections to certain liabilities or counterparties, while forbearance temporarily relaxes supervisory expectations during stress. Broader backstops, such as facilities aimed at money markets or funding pipes, may steady conditions indirectly, even if no crypto asset is supported.
FAQ about cryptocurrency bailouts
Do the Federal Reserve or U.S. Treasury have legal authority to bail out crypto firms or markets?
Generally no. The Fed’s emergency tools reach banks and eligible firms with approved collateral; Treasury lacks a mandate to rescue decentralized assets or exchanges without new law.
What would a formal no-bailout pledge mean for Bitcoin, stablecoins, and banks with crypto exposure?
Bitcoin: market risk stays private. Stablecoins: tighter prudential frameworks likely. Banks: stricter risk management and potentially higher capital or liquidity for crypto-linked exposures.
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Source: https://coincu.com/news/bitcoin-steadies-as-warren-seeks-fed-treasury-no-bailout/
