What are the interesting signals about the encryption industry at the end of the Walsh hearing
By Chloe, Challenger
For the first time since the United States Senate Banking Commission’s appointment hearing yesterday at 2200, the Federal Reserve’s nominee, Walsh, was nominated by Trump in January of this year, to publicly articulate his monetary policy stance and central bank’s vision of governance。
Previously, Walsh submitted financial documents revealing his investment profile in the encryption industry, with his group holding several dozen block chains and shares in digital asset companies across DeFi lending, decentralized derivatives, Layer 1 and Layer 2 networks, predicting markets, and even bitcoin payment infrastructure. Today, in order to comply with the ethical norms of the Government, he has promised to clear the vast majority of shares。
And the weight of this hearing is self-evident that, for the encrypted market, every statement made by Walsh could lead to market liquidity。
Focus of the hearings: how Walsh responds to a series of questions
According to a previous quote from Bloomberg, Trump has made it clear that he hopes that the new President will reduce interest rates. Walsh certainly has to face a series of questions about the Fed’s independence to test his ability to calm Washington while convincing financial markets that its policies will be based on real market demand。
at last night's hearing, it was at the heart of walsh's question: will he be able to remain independent under the pressure of trump's interest rate? walsh clearly responded that trump had never asked him to commit to a reduction of interest rates at any given point in time, that “the president has never asked me to pre-empt, promise or lock in any interest rate decision, that he has not asked for, that he has not put pressure on, and that i would never agree to do so”. when asked whether he would become a tromp “sock puppet”, walsh categorically denied that he would lead the fed as an independent actor if confirmed。
However, Democrat parliamentarians are not easy to buy. Senator Ruben Gallego pointed out that the Wall Street Journal had reported that Trump had questioned the White House during 45 minutes of talks with Walsh about whether he could be trusted to support the reduction, and that Trump himself had later confirmed that report to the newspaper. Gallego, to be blunt: "Someone here is lying, either you or President Trump." In response, Walsh stated that the journalist for the report “needs either better sources or higher standards of journalism”, but admitted that he had not asked for corrections at the time, nor did he respond to the confirmation of the report by Trump himself to the Wall Street Journal。
ON THE MORNING OF THE HEARING, HOWEVER, TRUMP MADE A MORE DIRECT STATEMENT IN AN INTERVIEW WITH THE CNBC, ACKNOWLEDGING THAT THE FED UNDER THE HEAD OF AWOSH HAD FAILED TO REDUCE THE INTEREST RATE AND THAT HE WAS “DISAPPOINTED” AND THAT HE DID NOT INTEND TO PRESS THE MINISTRY OF JUSTICE TO END THE INVESTIGATION AGAINST POWELL. THESE REMARKS UNDOUBTEDLY ADDED TO THE POLITICAL TENSION AT THE HEARING。
Elizabeth Warren, the Chief Democratic Member of the Senate Banking Commission, was the most aggressive. In her opening statement, she denounced Walsh as “unsuited to chair the Fed” and accused Trump of trying to dismantle the Fed’s independence line, with the aim of putting monetary policy at the service of short-term economic prosperity before the mid-term elections. Warren tested Walsh with the results of the 2020 elections, asking him, "Did Trump fail in the 2020 elections?" Walsh, however, has been reluctant to say “Trump lost” in a positive way, simply by “validating” the election results, in an attempt to cut politics off from the Fed’s responsibilities。
in terms of policy advocacy, walsh characterised the current inflation dilemma as a “lethal policy error” by the fed, pointing to an overall increase in prices after the epidemic of 25 to 35 per cent, which means that the fed is seriously failing. he called for “regime change”, including the establishment of a new inflation framework, the reform of communication and the use of interest rates and balance sheets to tackle inflation. he clarified, however, that the so-called institutional change referred to “changes in the policy system”, not to personnel cleansing, and he made it clear that the heads of the regional fed banks would not be dismissed。
AT THE SAME TIME, WALSH EXPRESSED DISSATISFACTION WITH THE PRACTICE OF FEDERAL RESERVE OFFICIALS TO PUBLISH EARLY FORECASTS OF INTEREST RATES, STATING THAT “TOO MANY FEDERAL RESERVE OFFICIALS COMMENTED IN ADVANCE ON THE DIRECTION OF INTEREST RATES AT THE NEXT MEETING, NEXT QUARTER AND EVEN NEXT YEAR, WHICH I FIND RATHER UNHELPFUL”. HE PREFERRED A “FULL AND INTENSE INTERNAL DEBATE” AT THE POLICY SESSION RATHER THAN FOLLOWING A WELL-REHEARSED SCRIPT. IT IS WORTH NOTING THAT WALSH IS NOT COMMITTED TO MAINTAINING THE CURRENT PRACTICE OF HOLDING PRESS CONFERENCES AFTER EACH FOMC MEETING, WHICH MEANS THAT THERE MAY BE SUBTLE CHANGES IN THE FUTURE POLICY TRANSPARENCY OF THE FED。
In terms of timing, Republican Senator Thom Tillis, while clearly expressing support for the presidency of Walsh, insisted that the nomination would not be approved until the Ministry of Justice investigation into Powell was completed. He called at the hearing: “Let us conclude this investigation so that I can support your confirmation.”
However, the hearings also revealed signs that some Democrat parliamentarians might support Walsh. Senator Catherine Cortez Masto, after speaking about a fresh look at inflation measurement, responded positively, saying “I hope you were right” and that he respected his theoretical beliefs as an economist. Senator Mark Warner was also considered as a potential supporter because he was not present at the hearing due to the funeral at his home。
What does that mean for the encryption market
For the encryption market, the significance of this hearing lies not only in the future interest rate path and dollar liquidity, but also in how the Fed’s system of banking regulation can be more deeply embedded in traditional finance in the face of encrypted capital。
It is noteworthy that during the hearings, Walsh, while repeatedly emphasizing the need for monetary policy to remain independent, was reluctant to extend the same criteria to banking policy and regulation. This also raises the strong question of Warren whether the Fed could face direct pressure from the President’s family’s business interests in the future involving discount windows, bank access or regulatory discretion, in the context of the Trump family’s expansion of encrypted financial operations into institutions, or even application for bank licences, through World Liberty Financial
The US Federal Reserve ' s $6.7 trillion balance sheet had previously been explicitly reduced by Walsh, but no specific implementation programme had been disclosed. Many officials and scholars have warned him not to be too radical or too hasty. The rhythm and scale of the abbreviations will have a direct impact on market liquidity, which is one of the core variables of encrypted asset pricing。
In addition, Walsh himself has a broad investment profile in the area of digital assets. According to its regulatory declaration documents, the investment portfolio of Walsh covers a number of companies in the area of decentralised finance, including shares in projects such as Solana, Lemon Cash and Flashnet, as well as other funds with encrypted currency openings. According to the Federal Reserve transaction rules, officials are not allowed to hold large amounts of encrypted currency, and therefore, if Walsh takes office, these holdouts must be cleared。
It is possible to speculate that a Fed president, who is at a depth in the encryption industry, whether or not his tenure directly affects the regulation of digital assets, means at least that this emerging asset class is not new to the decision-making community. The encryption market has reason to be cautiously optimistic about this potential new president, in the context of Walsh’s policy trend toward de-regulation and his ambition to try to reshape the Fed’s economic model and communication framework。
Finally, the hearing, although ostensibly focused on the Fed’s independence, was in fact a positive exchange of power between the White House, Congress, and the central bank. During the hearing, Walsh demonstrated the tactics of great statesmanship, neither openly contradicting Trump nor plaguing the market through repeated emphasis on independent decision-making. However, he avoided the details of the 2020 election results, the refusal to commit to maintaining the frequency of press conferences, and left room for his “independence” commitment。
Whether Walsh can formally take over from Powell before the end of his term of office on 15 May, which was blocked by several senators, depends on the direction of the Justice Department’s investigation, and Trump has made it clear that he has no intention of giving up. Whatever the ultimate time frame, the policy direction that Walsh represents is clear, a new Federal Reserve era that tends more to pave the way for a drop in interest rates based on productivity narratives that push central banks into “skinned” and institutional reform is under way, and, for the encryption market, the macro narrative framework could turn dramatically over the next four years。
