Federal Reserve Chair Kevin Warsh firmly stated during congressional testimony that the central bank will not bail out cryptocurrency firms in a financial crisis, emphasizing that the Fed’s role is to prevent systemic risks rather than provide emergency support. “We do not want to be in the bailout business. We want to be in a position where we aren’t bailing out anyone, including crypto,” Warsh said.
He acknowledged that digital assets are already part of the U.S. financial fabric, but opposed a central bank digital currency (CBDC), calling it a “bad policy choice.” Warsh also addressed the Fed’s dual mandate, stating that controlling inflation encourages hiring, and noted that inflation remains above target, requiring continued work. He reiterated the commitment to the 2% goal and argued that the labor market shows “remarkable resilience.”
On monetary policy, Warsh provided limited forward guidance, stressing the Fed’s independence from political pressure. He said the Fed will review its inflation framework transparently and study balance sheet policies without prejudging outcomes. Any changes to balance sheet strategy would be announced well in advance, he assured.
Warsh expressed optimism about artificial intelligence boosting productivity without sparking inflation, but warned the U.S. must accelerate quantum computing efforts. The hearing also saw market expectations for rate hikes decline slightly after weak June CPI data, though a year-end hike was not ruled out.
