Last week, while watching Walsh's hearing as Fed Chair, I noticed several interesting points. The first thing that surprised me was the size of his portfolio. He owns assets exceeding $130 million, and if he were to become Chair, he would be the wealthiest Fed Chair in history. Included in that are direct investments in cryptocurrencies such as Compound, dYdX, Lighter, as well as Solana, Optimism, Blast, and Zero Gravity.

However, what the market is truly paying attention to is not his promise to sell these positions, but rather how he plans to overcome the three major challenges he faces.

First, there is the question of whether the conditions for rate cuts will truly be met. Walsh was known as an inflation hawk from 2006 to 2011. Even during the 2008 financial crisis, when unemployment exceeded 10%, he repeatedly warned about the risks of rising inflation at FOMC meetings. He was also one of the strongest opponents of the second round of quantitative easing in 2010.

But his stance changed significantly by 2025. He began to argue that AI is a key factor in bringing about deflationary effects. He pointed to the high productivity growth rates during the Greenspan era of the 1990s, despite stable core inflation. In other words, Walsh now sees the current AI revolution as comparable to the internet revolution of that time.

However, the actual numbers are putting pressure on this assessment. The CPI for March 2026 rose 3.3% year-over-year, jumping from 2.4% in February. Core CPI also reached 2.6%. Rising energy prices due to tensions with Iran have contributed, and Walsh had to admit at the hearing, "There is still work to be done."

The second challenge concerns the independence of the Fed. When Senator Warren cited President Trump's social media post claiming "Kevin will lower interest rates if he becomes president," Walsh clarified that he has not received any interest rate promises from the president. Interestingly, he is redefining what independence means. He argues that independence is not automatically granted by law but is earned by the Fed maintaining price stability and not exceeding its authority.

Walsh views the inflation from 2021 to 2022 not as a mere misjudgment but as a result of the Fed itself supporting fiscal expansion and blurring the lines between monetary and fiscal policy. In other words, the erosion of independence is not due to external pressures like Trump but is a consequence of the gradual reduction of institutional authority, which stems from the Fed's own actions.

The third challenge is whether the Fed can simultaneously implement quantitative tightening and rate cuts. Walsh describes the current $6.7 trillion balance sheet as "expanding." Quantitative easing was originally a temporary emergency measure during 2008, but over the past decade, it has become semi-permanent. As a result, financial asset prices have been systematically inflated, benefiting those holding stocks and real estate, but not providing similar benefits to the average household.

Walsh advocates for significantly shrinking the balance sheet while also lowering interest rates—a scenario that involves considerable uncertainty for the markets. After the hearing, U.S. Treasury yields rose, likely reflecting the market's incorporation of this complexity.

Interestingly, he also makes specific proposals regarding cryptocurrencies. He states that stablecoins and on-chain price data could serve as real-time auxiliary indicators to supplement the shortcomings of existing statistical frameworks. His ownership of assets worth around $130 million in cryptocurrencies suggests that he views them not just as investments but as an information infrastructure that can enhance policy decision-making.

He also mentions launching a data project to track real-time prices across billions of items. This aims to replace the reliance on historical data within the existing CPI framework. Walsh's "system overhaul" signifies not just parameter adjustments but a fundamental transformation of the entire policy system.

What emerges from this hearing is that Walsh is not merely a policy changer but someone aiming to reform the policymaking process itself. His deep involvement in cryptocurrencies is likely part of that reform vision. How the market will respond from here depends entirely on how it evaluates this complex scenario.