Fed’s Kashkari Criticizes Crypto as Tool for Criminals

Minneapolis Federal Reserve President Neel Kashkari continued his harsh critique of cryptocurrencies on Monday, dismissing them as primarily used for drug deals and illegal activities. Speaking at a town hall event in Wisconsin, Kashkari claimed that “very few transactions are actually happening” in the crypto world, reinforcing his long-standing skepticism of digital assets.

Kashkari, who has led the Minneapolis Fed since 2016, argued that cryptocurrencies are rarely used to pay for legitimate goods and services, and are instead tied to criminal enterprises. “It almost never happens unless people are buying drugs or other illegal activities,” he said during the event hosted by the Chippewa Falls Area Chamber of Commerce.

Kashkari’s Long-Standing Criticism

Kashkari’s comments are consistent with his previous critiques of Bitcoin and other cryptocurrencies. Four years ago, he likened the digital asset market to a “giant garbage dumpster.” In 2021, he continued his criticism, stating that the market was overrun with “thousands of garbage coins” at a Montana conference.

His stance comes at a time when institutional adoption of cryptocurrencies is growing, with major players launching spot bitcoin and ether ETFs in the U.S. earlier this year. Despite this progress, Kashkari remains deeply skeptical of the industry.

Industry Pushback

Unsurprisingly, crypto proponents were quick to push back against Kashkari’s remarks. Nic Carter, a partner at Castle Island Ventures, took to X (formerly Twitter) to express his frustration, saying, “I think being this wrong should be illegal,” in response to Kashkari’s statements.

Caitlin Long, CEO of Custodia Bank, and Hailey Lennon, a partner at Brown Rudnick, also criticized the regulator’s dismissive assessment. Lennon pointed out that legitimate crypto projects have robust anti-money laundering protocols. “We’ve been fighting this false narrative for decades,” she wrote on X.

The Role of the Federal Reserve

As the governing body of the U.S. banking system, including crypto-related banking, the Federal Reserve holds significant authority over the regulatory landscape for digital assets. It also has the power to issue a central bank digital currency (CBDC) and impose restrictions on banks engaging in cryptocurrency transactions.

While Kashkari remains critical of crypto, institutional adoption of digital assets continues to grow. According to a 2024 poll from Nickel Digital, 80% of institutional investors and wealth managers plan to increase their investments in crypto assets in the near future.

Crypto Usage and Adoption

Kashkari’s comments contrast with data showing that crypto usage is gradually expanding. Although only 2% of U.S. adults made a payment using cryptocurrency in 2022, according to Federal Reserve data, institutional interest in crypto has accelerated. Additionally, a Pew Research Center survey found that 17% of American adults reported having owned digital assets in 2023.

As crypto continues to be a polarizing topic, figures like Kashkari remain opposed to its widespread adoption, while industry leaders fight to change the narrative and demonstrate the legitimacy of digital assets.