U.S. President Donald Trump is expected to select a new Federal Reserve chair by Christmas, and the leading candidate, Kevin Hassett, could potentially be a significant advantage for the cryptocurrency industry.
Hassett, currently a White House economic adviser, has reportedly emerged as a strong contender for the Federal Reserve chair position. He holds the role of director of the National Economic Council and was instrumental in overseeing the digital asset working group established by the White House earlier this year.
President Trump has been actively seeking to increase his administration's influence over the Federal Reserve, the central bank of the United States, thereby expanding the White House's authority over monetary policy.
While the formal nomination process has not yet commenced, industry observers are already anticipating the potential implications of a Hassett chairmanship for U.S. monetary policy and the broader cryptocurrency market.
Fed Frontrunner Kevin Hassett Has a History of Supporting Crypto
During the 1990s, Hassett served as an assistant professor of economics at the Columbia Business School. Concurrently, he worked as an economist within the Division of Research and Statistics at the Federal Reserve Board of Governors. His prior experience also includes serving as a policy consultant with the Department of the Treasury under the administrations of former presidents George H.W. Bush and Bill Clinton.
Hassett was a member of the White House Council of Economic Advisors during President Trump's first term. In the president's second term, Hassett assumed the position of director of the National Economic Council (NEC), an entity within the executive branch dedicated to formulating domestic and international economic policy.
Although he has not made extensive public pronouncements on the matter, Hassett is widely perceived as being supportive of cryptocurrencies. In June, he disclosed a stake in Coinbase valued at a minimum of $1 million and reported compensation of at least $50,001 for his participation in the exchange's Academic and Regulatory Advisory Council.
The NEC, under Hassett's directorship, played a role in the development of the White House's digital asset working group, which published a policy paper earlier this year outlining the administration's stance on cryptocurrencies.
It is important to note that the Federal Reserve does not directly regulate securities or commodities, meaning its policy changes cannot directly impact cryptocurrency regulation. However, a Federal Reserve chair with a favorable view of cryptocurrencies could still positively influence the industry through several indirect channels.
Lower interest rates, in general, tend to correlate with improved cryptocurrency prices. Juan Leon, a senior investment strategist at Bitwise, indicated that the implications for markets are "strongly bullish." He described Hassett as an "aggressive 'dove' who has publicly criticized current rates for being too high and advocated for deeper, faster cuts."
Zach Pandl, head of research at digital asset investment platform Grayscale, commented, "On the margin Hassett should be considered positive for crypto => supports rate cuts, past Coinbase advisor, NEC director during White House crypto policy push."
Furthermore, the Federal Reserve has regulatory oversight over banks, including bank holding companies, payment system access, reserve requirements, and liquidity and risk regulations. Adjustments to these rules could influence the ability of cryptocurrency companies to access essential services such as:
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Crypto custody solutions.
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Lending services utilizing crypto collateral.
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Access to established payment networks.
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Requirements for stablecoin issuers in relation to banking regulations.
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Settlement procedures.
Despite these considerations, the White House has not yet made a definitive nomination. Treasury Secretary Scott Bessent announced in late October that Hassett was among a shortlist of five nominees to succeed Jerome Powell. This list also included former Fed Governor Kevin Warsh, current Fed Governors Christopher Waller and Michelle Bowman, and BlackRock executive Rick Rieder. A formal nomination is anticipated by Christmas.
Trump Administration's Actions Threaten Federal Reserve Independence
President Trump has been actively working to increase his administration's control over the Federal Reserve, aiming to exert greater influence over his preferred monetary policies.
Earlier this year, Trump made an attempt to remove Federal Reserve Governor Lisa Cook from her position. Her refusal to resign led to a legal challenge that reached the Supreme Court, which, for the time being, has allowed her to remain in her role.
In a court filing, Cook's legal counsel, Abbe Lowell, characterized the attempt as a "broadside attack on the century-old independence of the Federal Reserve System."
The Council on Foreign Relations has emphasized the importance of the Federal Reserve's independence, stating that it "shields the Federal Reserve from undue political influence, such as pressure from the White House to lower interest rates ahead of an election, which could offer short-term political gains but cause long-term economic harm."
An independent Federal Reserve also "enhances the Fed’s credibility" and fosters greater market confidence in its decisions. "Crucially, it also empowers the Federal Reserve to take difficult but necessary actions, even when they are unpopular."
John Authers, a senior editor for markets and a Bloomberg Opinion columnist, wrote that the selection of Hassett "appears to be about loyalty."
Trump regards nominating Jerome Powell eight years ago as a big mistake. Waller, Warsh and Rieder all in different ways might establish themselves as independent from the administration.
George Pollack, a senior U.S. policy analyst at Signum Global Advisors, reportedly stated that Trump intends to nominate Hassett "because of his confidence that Hassett will be the candidate most likely to support the administration’s priorities."
If the Federal Reserve were to become an extension of the administration, the short-term outcomes for cryptocurrency markets might be favorable. However, this could lead to broader economic challenges. Lower-than-necessary interest rates might provide short-term political advantages but could result in increased inflation.
The Center for American Progress explained, "Knowing that the rates will be based on well-researched data, and not political whims, assures the world that the U.S. economy will remain relatively stable and its markets will remain rational."