What signals worth noting for the crypto industry after the Washed hearing?

Author: Chloe, ChainCatcher

Federal Reserve nominee Waller appeared before the U.S. Senate Banking Committee for a confirmation hearing at 10:00 PM yesterday, marking his first time publicly articulating his views on monetary policy and central bank governance in an official setting since being nominated by Trump in January this year.

Previously, Waller submitted financial filings that exposed his investment arrangements in the crypto industry. Waller holds equity in dozens of blockchain and digital asset companies, with his investment reach spanning DeFi lending, decentralized derivatives, Layer 1 and Layer 2 networks, prediction markets, and even Bitcoin payment infrastructure. Now, to comply with government ethics rules, he has pledged to divest the vast majority of his holdings.

The weight of this hearing is self-evident. For the crypto market, every statement Waller makes could affect the direction of market liquidity.

Key focus of the hearing assembled: How Waller responds to a string of questions

According to earlier reporting by Bloomberg, Trump has clearly said he wants the new chair to lower interest rates. Waller will undoubtedly face a series of questions about the Fed’s independence—testing whether he can both soothe Washington and persuade financial markets that his policy direction will be based on real market demand.

At last night’s hearing, the core question Waller faced was whether he can maintain independence under Trump’s pressure to cut rates. Waller responded clearly that Trump has never asked him to commit to a rate cut at any specific time: “The President has never asked me to decide, commit, or lock in any interest-rate decision in advance. He has not asked for it, pressured me to do it, and I would never agree to do so.” When asked whether he would become Trump’s “sock puppet,” Waller denied it outright, saying that if confirmed, he would lead the Fed as an independent actor.

However, Democratic lawmakers were not so easily convinced. Senator Ruben Gallego sharply pointed out that The Wall Street Journal had reported that Trump pressed Waller during a 45-minute meeting at the White House to ask whether he could be trusted to support rate cuts—and that Trump later confirmed the report to the paper himself. Gallego said bluntly: “Someone here is lying—it’s either you or President Trump.” Waller replied that the reporter “either needs better sources or higher journalistic standards,” but he admitted that at the time he did not request a correction and did not respond to Trump’s confirmation of the report to The Wall Street Journal.

But just on the morning of the hearing, Trump took an even more direct stance in an interview with CNBC. He admitted that if the Fed led by Waller failed to cut rates, he would “be disappointed,” and he also said he does not plan to pressure the Justice Department to end its investigation of Powell. Those remarks undoubtedly added yet another spark to the political tension surrounding the hearing.

The most forceful assault came from Elizabeth Warren, the top Democratic member of the Senate Banking Committee. In her opening statement, she directly accused Waller of being “unsuitable to serve as Fed chair,” alleging that Trump is trying to dismantle the Fed’s independence safeguards in order to make monetary policy serve short-term economic prosperity before the midterm elections. Warren further tested Waller with the results of the 2020 election (Trump has long insisted that the 2020 election was “rigged”), asking him: “Did Trump lose the 2020 election?” But Waller consistently refused to directly say “Trump lost,” instead brushing it off by saying the election results “have been certified,” attempting to separate political issues from the Fed’s responsibilities.

As for policy positions, Waller characterized the current inflation predicament as a “fatal policy mistake” by the Fed. He pointed out that since the pandemic, prices have risen across the board by 25% to 35%, meaning the Fed is seriously off course. He called for “regime change,” including establishing a new inflation framework, reforming the way the Fed communicates, and using both interest rates and the balance sheet—two levers at once—to tackle inflation. However, he clarified that the so-called “regime change” means “changes to the policy framework,” not a purge of personnel. He also explicitly said he would not fire the presidents of regional Federal Reserve banks.

Meanwhile, Waller expressed dissatisfaction with the practice of Fed officials issuing forecasts about the direction of interest rates in advance. He said, “Too many Fed officials are giving their opinions about the direction of rates for the next meeting, next quarter, and even next year, in advance. I think that’s not very helpful.” He preferred to hold “full and vigorous internal debate” during policy meetings rather than follow a rehearsed script. Notably, Waller did not commit to maintaining the current practice of holding press conferences after every FOMC meeting, implying that future Fed transparency could see subtle changes.

On timing, Republican Senator Thom Tillis, although he clearly stated his support for Waller as chair, still insisted that he would not allow the nomination to move forward before the Justice Department’s investigation of Powell concludes. At the hearing, he urged: “Let’s end this investigation, so that I can support your confirmation.”

That said, the hearing also revealed signs that some Democratic lawmakers might support Waller. After Waller discussed revisiting the way inflation is measured, Senator Catherine Cortez Masto responded positively, saying, “I hope you’re right,” and stating she respects his theoretical beliefs as an economist. Senator Mark Warner was absent due to a family bereavement, and he has also been viewed as a potential supporting vote.

What does this mean for the crypto market?

For the crypto market, the significance of this hearing lies not only in the future interest-rate path and dollar liquidity, but also in how the Fed and the banking regulatory system will respond to crypto capital becoming even more deeply embedded in traditional finance.

Notably, although Waller repeatedly emphasized at the hearing that monetary policy must remain independent, he was unwilling to extend the same standard to bank policy and the regulatory realm. This also drew strong questioning from Warren: given that Trump’s family has already extended into the institutional system through crypto financial businesses such as World Liberty Financial—and even applied for banking licenses—if future matters involve the discount window, bank access, or regulatory discretion, could the Fed face direct pressure from the President’s family’s commercial interests?

Earlier, Waller also clearly proposed significantly cutting the Fed’s $6.7 trillion balance sheet, but he has yet to reveal the specific implementation plan. Multiple officials and scholars have warned him not to be overly aggressive or to move too hastily. The pace and scale of balance sheet reduction will directly affect market liquidity, which is one of the core variables in the pricing of crypto assets.

In addition, Waller himself has a wide-ranging investment layout in the digital asset sector. According to his regulatory filings, Waller’s investment portfolio includes equity stakes in multiple companies in the decentralized finance field, including projects such as Solana, Lemon Cash, and Flashnet, as well as other funds with exposure to cryptocurrencies. Under Fed trading rules, officials are not allowed to hold large cryptocurrency positions; therefore, if Waller formally takes office, these holdings must be liquidated.

It can be inferred that a Fed chair with deep involvement in the crypto industry—regardless of whether his tenure will directly influence digital asset regulation—at least signals that the decision-making leadership is not unfamiliar with this emerging asset class. Combined with Waller’s policy inclination toward deregulation, and his ambitions to reshape the Fed’s economic model and communication framework, the crypto market has reason to hold a cautiously optimistic view of this potential new chair.

Finally, although the hearing ostensibly focused on Fed independence, in practice it was a direct contest over the boundaries of power among the White House, Congress, and the central bank. At the hearing, Waller demonstrated tactics typical of a politician: he neither openly contradicted Trump nor reassured markets by repeatedly emphasizing independent decision-making. However, by avoiding details such as the 2020 election outcome and refusing to commit to maintaining press-conference frequency, he also left ambiguity in the space of his “independence” pledge.

With resistance from multiple senators, whether Waller can be formally installed before Powell’s term ends on May 15 depends on the direction of the Justice Department investigation—while Trump has already made clear that he has no intention of backing down. No matter how the timeline ultimately plays out, the policy direction represented by Waller is already clear: a new era of the Fed is taking shape—one more inclined to pave the way for rate cuts with a productivity narrative, push the “shrinking” of the central bank, and pursue systemic reforms. For the crypto market, the macro narrative framework of the next four years may see a major turn.