Minneapolis Fed President Criticized for Remarks on Illegal Crypto Usage

Minneapolis Federal Reserve President Neel Kashkari has found himself on the wrong end of a backlash after stating that most cryptocurrency transactions involve drugs or illegal activities.

The comment from the official, a known crypto skeptic, did not go unchallenged, with several members of the community calling him out for it.

Fed Official Says Crypto Mostly Used for Illegal Activity

Kashkari was at a town hall meeting in Chippewa Falls, Wisconsin, when a member of the audience asked whether the Fed had the capacity to collect data on crypto transactions since most of them happened “outside of the formal channels.”

While acknowledging that the agency was pioneering new data sources to keep abreast of the happenings in the sector, Kashkari said that despite crypto’s recent growth, legitimate transactions for goods and services using such assets remain rare.

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

Interestingly, his comments come only days after the Minneapolis Federal Reserve Bank controversially suggested the government should tax or ban crypto assets, including Bitcoin (BTC), to help maintain a deficit on its budget.

Experts Refute Claims

After a crypto news account on X reported the remarks, it set off a frenzy of condemnations. Hailey Lennon, a crypto law analyst and former regulatory counsel for Coinbase, challenged the Fed’s comments, highlighting that legitimate crypto projects have state-of-the-art anti-money laundering measures.

She also noted that cash, not cryptocurrency, remains the preferred method for funding illicit activity, adding, “We’ve been fighting this false narrative for a decade.”

Investor Nic Carter echoed the sentiments. In a series of posts on X, he criticized Kashkari’s views as misinformed, referencing a past report by Chainalysis that found only 0.34% of all crypto transactions in 2023 were linked to illegal activities.

Carter called out the Fed official for neglecting such facts, saying, “I think being this wrong should be illegal.” He also shared a link to Stripe’s $1.1 billion acquisition of Bridge, a stablecoin payments platform, as further evidence of the growing legitimacy of digital assets.

Several other commentators did not hold back either, with some accusing Kashkari of spreading misinformation. Others even questioned his ability to occupy such a high-profile office.

“At a minimum, being that ignorant should disqualify him from a high-profile financial job,” said Dave Weisberger.

The Minneapolis Fed head also touched on the topic of Central Bank Digital Currencies, suggesting that there was nothing a CBDC could do that is not already being done by payment systems like Venmo or PayPal.

He also claimed that there was no evidence that a digital dollar would help solve problems faced by unbanked and underserved people in the United States.