Fed President Says Crypto 'Almost Never' Used Outside of Drug Deals, Illegal Activities

Minneapolis Federal Reserve President Neel Kashkari on Monday dismissed crypto as the currency of drug deals and other criminal enterprises. 

Kashkari told audience members at a town hall in Wisconsin that “very few transactions are actually happening” in crypto, a video of the event hosted by the Chippewa Falls Area Chamber of Commerce shows. The comments underscore the bank regulator's resistance to crypto, even as institutional adoption of the asset class heats up. 

“They're not paying for goods and services using crypto,” Kashkari said Monday. “It almost never happens unless people are buying drugs or other illegal activities.”

Kashkari, who clinched the Federal Reserve Bank of Minneapolis’ highest office in 2016, has often scoffed at Bitcoin and other cryptocurrencies.

Four years ago, the former investment banker compared the digital asset market to a “giant garbage dumpster.” And, in 2021, he similarly bemoaned the market was overrun with “thousands of garbage coins” at a conference in Montana.

Proponents of the cryptocurrency industry have often countered those criticisms, however. And on Monday, they again pushed back against the regulator's abrasive remarks. 

“I think being this wrong should be illegal,” Castle Island Ventures partner Nic Carter said Monday on X, responding to Kashkari’s comments.

Custodia Bank CEO Caitlin Long and Brown Rudnick Partner Hailey Lennon joined the chorus of crypto industry supporters criticizing the regulator's bleak assessment of the digital assets market.    

“Legitimate crypto projects in the space have state of the art anti-money laundering policies to prevent this,” Lennon said in an X post. “We’ve been fighting this false narrative for decades.” 

The Federal Reserve system governs the regional and federal bank systems, including crypto-related banking in the U.S. It has the authority to issue restrictions on crypto banking, in addition to the power to issue a central bank digital currency.

Just 17% of American adults reported ever having owned digital assets in 2023, according to a Pew Research Center survey, although industry-funded polls have set that number much higher. Meanwhile, U.S. Federal Reserve data shows that just 2% of the US adult population made a payment using cryptocurrencies in 2022. 

Institutional adoption of crypto, however, has picked up in recent months, accelerated by the approval of spot bitcoin and ether ETFs in the U.S. earlier this year. Roughly 80% of institutional investors and wealth managers reported planning to increase their investments in digital assets in the coming months, according to a 2024 poll from Europe-based investment manager Nickel Digital.