US DOJ ends investigation into Powell and clears the way for Warsh

• Federal investigation concluded impacts cryptocurrency market.
• With Powell cleared of wrongdoing, Warsh gains strength in the Senate.
• US monetary policy may influence cryptocurrencies.

The U.S. Department of Justice is expected to conclude its criminal investigation into Federal Reserve Chairman Jerome Powell later today. The decision eases a political impasse that had been delaying the nomination of Kevin Warsh to lead the U.S. central bank.

The federal prosecutor for the District of Columbia, Jeanine Pirro, stated The case will be transferred to the Fed's internal audit body. This move shifts the focus from suspicions about alleged budget overruns in the renovation of the institution's headquarters in Washington to an administrative audit.

Behind the scenes, members of the Department of Justice have already informed senators about the change of course. Among them is Thom Tillis, a member of the Senate Banking Committee, who had been conditioning the advancement of Warsh's nomination on the end of the investigation.

The issue revolves around high costs in a project estimated at US$2,5 billion. Powell himself had already requested an independent review the previous year. Now, the Fed's inspector general is expected to conduct a new analysis.

“This morning, the Federal Reserve Inspector General was asked to examine the excessive construction costs—in the billions of dollars—that have been borne by taxpayers,” Pirro wrote. “I expect a comprehensive report soon and am confident that the outcome will help resolve, once and for all, the issues that led this office to issue subpoenas.”

The prosecutor also made it clear that the closure does not preclude further action. “Therefore, I have instructed my office to close our investigation while the Inspector General conducts the inquiry,” Pirro wrote. “Note, however, that I will not hesitate to reopen a criminal investigation should the facts warrant it.”

Powell's term ends next month, but he has indicated he will remain until the Senate confirms the nominee appointed by current US President Donald Trump. The expectation is that withdrawing the investigation will accelerate that process.

The White House reinforced the need for clarification regarding the Fed's spending. "American taxpayers deserve answers about the Federal Reserve's fiscal mismanagement, and the most powerful officials in the Office of the Inspector General are best positioned to get to the bottom of this," stated spokesman Kush Desai.

In the financial market, decisions involving the Federal Reserve often directly impact risk assets, including cryptocurrencies. Changes in the institution's leadership and in the conduct of monetary policy remain on the radar of investors attentive to the next moves in US interest rates.