Minneapolis Fed’s Kashkari Faces Backlash Over Crypto Remarks

Neel Kashkari, the President of the Minneapolis Federal Reserve, has faced significant backlash after claiming that the majority of cryptocurrency transactions are related to drugs or other illegal activities.

This statement from Kashkari, who is known for his skepticism towards crypto, prompted pushback from various members of the crypto community.

Fed Official Claims Crypto Primarily Utilized for Illegal Activities

Kashkari made these remarks during a town hall meeting in Chippewa Falls, Wisconsin. When an audience member inquired whether the Fed could gather data on crypto transactions occurring “outside of the formal channels,” he responded.

Though he admitted that the agency is exploring new data sources to remain informed about the crypto sector, Kashkari remarked that even with the recent surge in crypto, legitimate transactions for goods and services remain infrequent.

“They’re not purchasing goods and services with crypto. It almost never occurs, except when individuals are acquiring drugs or engaging in other illegal activities,” Kashkari stated.

Significantly, his remarks come shortly after the Minneapolis Federal Reserve Bank controversially suggested imposing taxes or bans on crypto assets, including Bitcoin (BTC), to help address the budget deficit.

Experts Challenge Statements

A report on the crypto news platform X about Kashkari’s comments ignited a wave of criticism. Hailey Lennon, a crypto law analyst and former regulatory counsel for Coinbase, contested the Fed’s assertions, noting that credible crypto projects implement advanced anti-money laundering protocols.

She further pointed out that cash continues to be the primary method for financing illegal activities, asserting, “We’ve been battling this misleading narrative for a decade.”

Investor Nic Carter similarly criticized the claims. In a series of posts on X, he objected to Kashkari’s perspective as ill-informed, referencing a previous report by Chainalysis which indicated that merely 0.34% of all crypto transactions in 2023 were associated with illegal activities.

Carter admonished the Fed official for disregarding such statistics, stating, “I believe being this wrong should be against the law.” He even shared a link to Stripe’s $1.1 billion acquisition of Bridge, a stablecoin payment platform, as evidence of the increasing credibility of digital currencies.

Other commentators were equally vocal, with some accusing Kashkari of disseminating misinformation. Others even questioned his qualifications for holding such a prominent position.

“At the very least, such a level of ignorance should disqualify him from a high-ranking financial role,” remarked Dave Weisberger.

Additionally, the Minneapolis Fed president addressed Central Bank Digital Currencies, asserting that a CBDC would not provide any advantages beyond what existing payment systems like Venmo or PayPal already offer.

He also argued that there is no concrete evidence suggesting that a digital dollar could resolve the challenges faced by unbanked and underserved individuals in the United States.