What are the noteworthy signals for the cryptocurrency industry after the Wash hearing?
Author: Chloe, ChainCatcher
Fed nominee Waller attended the U.S. Senate Banking Committee confirmation hearing at 22:00 yesterday, marking his first public articulation of his monetary policy views and central bank governance vision since being nominated by Trump in January this year.
Previously, Waller submitted financial documents revealing his investment layout in the cryptocurrency industry, holding stakes in dozens of blockchain and digital asset companies, with investments spanning DeFi lending, decentralized derivatives, Layer 1 and Layer 2 networks, prediction markets, and even btc-42">Bitcoin payment infrastructure. Now, to comply with government ethics standards, he has committed to liquidating the vast majority of his holdings.
The significance of this hearing is evident; for the cryptocurrency market, every statement from Waller could influence the direction of market liquidity.
Key Points from the Hearing: How Waller Responded to a Series of Questions
According to previous reports from Bloomberg, Trump has clearly expressed his hope that the new chair will lower interest rates. Waller undoubtedly faced a series of questions regarding the independence of the Federal Reserve, testing whether he could reassure Washington while also convincing financial markets that his policy direction would be based on genuine market demands.
At last night's hearing, the core inquiry Waller faced was whether he could maintain independence under Trump's pressure to lower rates. Waller responded clearly that Trump never asked him to commit to lowering rates at any specific time, stating, "The president never asked me to pre-determine, commit to, or lock in any interest rate decision; he did not ask or pressure me, and I would never agree to do so." When asked if he would become Trump's "sock puppet," Waller firmly denied it, stating that if confirmed, he would lead the Federal Reserve as an independent actor.
However, Democratic senators were not easily convinced. Senator Ruben Gallego sharply pointed out that The Wall Street Journal reported Trump questioned whether he could trust Waller to support rate cuts during a 45-minute meeting at the White House, and Trump himself later confirmed this report to the paper. Gallego bluntly stated, "Someone here is lying; it's either you or President Trump." Waller responded that the reporter of that story "either needs better sources or higher journalistic standards," but he admitted he did not request a correction at the time and did not respond to Trump's confirmation of the report to The Wall Street Journal.
However, on the morning of the hearing, Trump more directly stated in an interview with CNBC that he would "feel disappointed" if the Federal Reserve led by Waller failed to lower rates, while also indicating he did not intend to pressure the Justice Department to end its investigation into Powell. This undoubtedly added fuel to the political tension surrounding the hearing.
The chief Democratic senator on the Banking Committee, Elizabeth Warren, was the most aggressive in her attacks. In her opening statement, she directly accused Waller of being "unsuitable to serve as Fed chair," accusing Trump of attempting to dismantle the independence of the Federal Reserve to make monetary policy serve short-term economic prosperity before the midterm elections. Warren further tested Waller on the outcome of the 2020 election (which Trump has long claimed was "manipulated"), asking him, "Did Trump lose the 2020 election?" However, Waller was reluctant to directly say "Trump lost," only stating that the election results "have been certified," attempting to separate political issues from the responsibilities of the Federal Reserve.
Regarding policy proposals, Waller characterized the current inflation predicament as a "fatal policy mistake" by the Federal Reserve, pointing out that prices have risen by 25% to 35% post-pandemic, indicating a severe misalignment by the Fed. He called for "regime change," including establishing a new inflation framework, reforming communication methods, and using both interest rates and the balance sheet to tackle inflation. However, he clarified that the so-called regime change refers to "changes in policy regime," not personnel purges, and he explicitly stated he would not fire regional Federal Reserve Bank presidents.
At the same time, Waller expressed dissatisfaction with the practice of Fed officials making predictions about interest rate direction in advance, stating, "Too many Fed officials express opinions on the direction of rates for the next meeting, next quarter, or even next year; I think this is quite unhelpful." He prefers to have "full and vigorous internal debates" during policy meetings rather than acting according to a rehearsed script. Notably, Waller did not commit to maintaining the current practice of holding press conferences after each FOMC meeting, which suggests that the transparency of the Fed's policies may undergo subtle changes in the future.
In terms of timing, Republican Senator Thom Tillis, while clearly expressing support for Waller's chairmanship, insisted that he would not allow the nomination to pass until the Justice Department's investigation into Powell concludes. He called during the hearing, "Let's end this investigation so I can support your confirmation."
However, the hearing also revealed signs that some Democratic senators might support Waller. Senator Catherine Cortez Masto responded positively after Waller discussed re-examining inflation measurement methods, stating, "I hope you are right," and expressed respect for his theoretical beliefs as an economist. Senator Mark Warner, who did not attend the hearing due to a family bereavement, is also viewed as a potential supportive vote.
What Does This Mean for the Cryptocurrency Market?
For the cryptocurrency market, the significance of this hearing lies not only in the future path of interest rates and dollar liquidity but also in how the Federal Reserve and banking regulatory system will respond to the deeper embedding of crypto capital in traditional finance.
Notably, while Waller repeatedly emphasized the need for monetary policy to remain independent during the hearing, he was unwilling to extend the same standard to banking policy and regulation. This drew strong questioning from Warren: given that the Trump family has already extended into the system through crypto financial businesses like World Liberty Financial and even applied for a banking license, will the Fed potentially face direct pressure from the president's family's business interests in future matters involving the discount window, bank access, or regulatory discretion?
Previously, Waller had also clearly stated the need to significantly reduce the Federal Reserve's $6.7 trillion balance sheet, but he has yet to disclose a specific execution plan. Several officials and scholars have warned him not to be too aggressive or hasty. The pace and scale of balance sheet reduction will directly impact market liquidity, which is one of the core variables in pricing crypto assets.
Additionally, Waller himself has a broad investment layout in the digital asset space. According to his regulatory filings, Waller's investment portfolio includes stakes in several companies in the decentralized finance sector, including projects like Solana, Lemon Cash, and Flashnet, as well as other funds with cryptocurrency exposure. According to Fed trading rules, officials are not allowed to hold large positions in cryptocurrencies, so if Waller is officially appointed, these holdings must be liquidated.
It can be speculated that a Fed chair with deep investments in the crypto industry, regardless of whether his tenure will directly influence digital asset regulation, at least indicates that the decision-making body is not unfamiliar with this emerging asset class. Coupled with Waller's inclination towards deregulation and his ambition to reshape the Fed's economic model and communication framework, the crypto market has reason to hold cautious optimism towards this potential new chair.
Finally, while this hearing ostensibly focused on the independence of the Federal Reserve, it was, in fact, a direct confrontation over the boundaries of power between the White House, Congress, and the central bank. Waller displayed highly political tactics during the hearing, neither openly contradicting Trump nor calming the market by repeatedly emphasizing independent decision-making. However, his avoidance of the 2020 election results and refusal to commit to maintaining the frequency of press conferences left ambiguous space for his "independence" commitment.
With several senators standing in the way, whether Waller can officially take over before Powell's term ends on May 15 depends on the direction of the Justice Department's investigation, and Trump has made it clear he has no intention of yielding. Regardless of the final timeline, the policy direction represented by Waller is already clear: a new era for the Federal Reserve that leans towards a productivity narrative to pave the way for rate cuts and promote "streamlining" and institutional reform is brewing, and for the cryptocurrency market, the macro narrative framework for the next four years may undergo a significant shift.
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