Fed's first "crypto-friendly" governor? Kevin Warsh returns to the Board, what is the impact on BTC?

Author: Max, Crypto City Senate Confirms Governor Nomination, Warsh Poised to Take the Helm of the Fed The U.S. political and financial circles witnessed a major turning point in May 2026. The U.S. Senate officially confirmed Kevin Warsh as a member of the Fed Board of Governors on Tuesday with a 51-45 vote, a development that paved the final mile for him to succeed current Chair Jerome Powell. Warsh's term as governor will span 14 years, running from February 2026 to 2040. In this highly partisan vote, Republicans unanimously supported him by virtue of their majority, while on the Democratic side, only Pennsylvania Senator John Fetterman cast a yes vote, breaking the tradition that Fed Chair nominations typically enjoy bipartisan consensus. As Powell's four-year term as Chair is set to expire this Friday, the Senate is expected to proceed with a separate confirmation vote for Warsh as Chair on Wednesday. According to the current arrangement by Senate Majority Leader John Thune, Warsh's chances of passing are extremely high. Although Powell is about to step down from the Chair position, he has indicated he will remain on the Board of Governors until 2028, motivated by the desire to maintain organizational stability and independence until the Justice Department concludes its investigation into the Fed headquarters renovation project. This rare situation of "two generations of Chairs coexisting" adds complex political maneuvering variables to the future implementation of U.S. monetary policy. Crypto Asset Background Takes Center Stage, Warsh Views Bitcoin as a Policy Alarm Unlike Fed officials who have held skeptical attitudes toward digital assets in the past, Warsh's deep ties to the cryptocurrency industry have caught the market's attention. According to his financial disclosure report submitted to the Office of Government Ethics, Warsh holds a substantial net worth of over $100 million, with his asset portfolio including multiple Web3-related investments. These holdings involve prediction market platform Polymarket, blockchain infrastructure company Tenderly, and Bitcoin payment startup Flashnet. In addition, he holds related equity in digital asset management firm Bitwise and the stablecoin project Basis. Warsh has pledged to divest these assets once he officially takes office, but his openness toward cryptocurrency has long been an undeniable fact. Warsh has publicly stated that Bitcoin is a transformative technology, even describing it as "an excellent policeman of financial policy." He believes that Bitcoin's price volatility can reflect the market's confidence in the Fed's handling of inflation and monetary credibility. At the Senate Banking Committee hearing, he emphasized that cryptocurrency has deeply penetrated the structure of the U.S. financial system; it is part of the overall financial services industry, not merely a marginalized speculative tool. Rate Cut Expectations Collapse, Inflation Shadows and Hawkish Return Shake Markets Although President Trump has been pressuring the Fed to significantly cut rates to stimulate the economy, Warsh's ascension has instead chilled market expectations for loose policy to a freezing point. During his tenure as governor, Warsh is known for his hawkish image focused on inflation risks. Although he reiterated at recent hearings that he would maintain the Fed's independence, he also expressed concerns about the rapidly expanding balance sheet and overly loose interest rate environment. As a result, CME's FedWatch tool shows that traders have substantially scaled back their rate cut expectations for 2026 and 2027. The market currently forecasts that interest rates will remain in the range of 3.5% to 3.75%, with only 2.9% of forecasts anticipating a rate cut. Economic data has further intensified this anxiety. The U.S. April Consumer Price Index (CPI) rose to 3.8% year-on-year, higher than the market expectation of 3.7%, setting a new three-year high. Coupled with tensions between the U.S. and Iran keeping oil prices elevated, the risk of prolonged closure of the Strait of Hormuz has set off energy inflation alarms. Under this macroeconomic pressure, both Bitcoin and gold gave back their gains. The Bitcoin price fell more than 1.5% after the news broke, dropping below 80,900 and quickly retreating from the intraday high of 82,098. Gold and silver also declined by 0.7% and 2% respectively, reflecting investors' fears of a prolonged high interest rate environment. Regulatory Bill at Critical Juncture, the Future of Web3 Under Warsh's Tenure Warsh's tenure coincides with a critical juncture for U.S. cryptocurrency regulation. The Senate Banking Committee is expected to deliberate the CLARITY Act (Digital Asset Market Clarity Act) this Thursday. This 309-page draft attempts to delineate the jurisdiction between the SEC and the CFTC, and includes amendments regarding the prohibition of stablecoin yields. Although the bill faces considerable opposition from labor organizations and the traditional banking industry, the market generally believes that a Fed Chair with deep understanding of crypto technology will help accelerate the research and implementation of stablecoin regulatory frameworks and digital payment systems. Warsh will face the severe challenge of how to strike a balance between political pressure and economic stability. Bridgewater Associates founder Ray Dalio recently pointed out that Bitcoin, due to its lack of privacy, is currently unable to play the core role of a safe-haven asset, and central banks around the world are unlikely to hold large amounts in the short term. However, Warsh believes that AI-driven productivity gains can offset inflationary pressures, a perspective that may become a new argument for his future interest rate policy decisions. As Warsh officially takes his seat at the Fed, global financial markets are holding their breath for this new helmsman with crypto-savvy thinking, watching how he will reshape the status of the U.S. dollar and the future direction of monetary policy. (The above content is excerpted and reprinted with authorization from partner Crypto City; link to original article)