Fed’s Waller: Crypto ‘hype’ fading as TradFi ties and regulatory uncertainty weigh
Federal Reserve governor Chris Waller said crypto market euphoria that followed the current U.S. administration’s rise is fading as the sector becomes more integrated with traditional finance. Waller told a payments conference that mainstream financial firms increasing crypto exposure helped lift prices, but those firms later had to adjust risk positions, contributing to recent sell-offs. He also noted that Congress’s delay in passing a crypto market-structure bill added regulatory uncertainty, deterring some participants. Waller described recent volatility and price declines as “part of the game” for crypto markets and advised cautious participation. Bitcoin has dropped roughly 45% from its October peak (~$125,000) and was trading near $69,500 after a short fall below $60,000. Waller said the Fed aims to introduce limited “payment accounts” (so-called “skinny master accounts”) this year to give fintech and crypto firms restricted access to the central banking system; feedback was still being reviewed. The proposed accounts would have fewer privileges than full master accounts, including no interest on balances and balance limits, intended to support payments innovation while protecting system safety.
Neutral
The announcement is neutral for markets overall. Waller’s comments signal two offsetting forces: continued institutional integration of crypto (which historically supports higher liquidity and price discovery) and heightened regulatory and risk-position adjustments from TradFi entrants (which can amplify sell-offs). His characterization of volatility as inherent offers no immediate policy tightening threat, but the mention of congressional delays highlights regulatory uncertainty, which typically suppresses risk-on appetite. The Fed’s proposed ‘payment accounts’ are supportive long-term infrastructure for fintech and crypto access to central banking services, but their limited privileges and implementation timeline mean they are not an immediate bullish catalyst. Short-term impact: likely increased caution and episodic selling when TradFi rebalances positions or when regulatory news surfaces. Long-term impact: neutral-to-mildly bullish — clearer access paths to central banking could institutionalize participation and liquidity, but outcomes depend on final rule details and congressional action. Similar events: past periods when banks added then reduced crypto exposure (e.g., 2021–2022 institutional flows) produced volatility spikes followed by gradual stabilization as market structure matured.