The United States Federal Reserve Chairman Jerome Powell says that the Russian invasion of Ukraine may underscore a call for regulations on the crypto industry. He argues that regulations could hinder the ability of sanctioned individuals or entities from using cryptocurrencies to avoid sanctions.
The Fed Chair provided testimony to the House Financial Services Committee regarding the state of the US economy and as its current monetary policy. During his testimony the topic of cryptocurrency was raised. The Fed Chair called for a regulatory framework for the crypto industry similar to that of other leading technologies in order to prevent the funding of illicit or illegal activities.
“I just think there is the need for Congressional action on digital finance, including cryptocurrencies. We have this burgeoning industry which has many parts to it, and there isn’t in place the kind of regulatory framework that needs to be.“
He later added “It’s probably no different with railroads, or telephones, or the internet and ultimately what’s needed is a framework and in particular, ways to prevent these unbacked cryptocurrencies from servicing as a vehicle for terrorist finance and just general criminal behavior, tax avoidance, and the like.“
Politicians calling for Crypto Regulations
Several prominent politicians have also recently called for regulating the crypto industry. US Senator Elizabeth Warren of Massachusetts recently tweeted “Cryptocurrencies risk undermining sanctions against Russia, allowing Putin and his cronies to evade economic pain. U.S. financial regulators need to take this threat seriously and increase their scrutiny of digital assets.”
Former first lady and US Senator from New York Hillary Clinton in a recent interview stated “I was disappointed to see that some of the so-called crypto exchanges, not all of them but some of them, are refusing to end transactions with Russia for some, I don’t know, philosophy of libertarianism or whatever.” She later added “In this specific case of Ukraine, I do think that the Treasury Department [and] the Europeans should look hard at how they can prevent the crypto markets from giving an escape hatch to Russia, both governmental and private transactions in and out of Russia.” Clinton also called on President Biden and his administration last year to look into crypto regulations, warning that it could be manipulated by China and Russia and had the ability to undermine the US dollar as the world’s reserve currency. There are also politicians who have touted cryptocurrency as an expression of freedom and highlighted its positive contributions to society including just recently providing Ukraine much needed donations via cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH).
Will the United States create a central bank digital currency (CBDC)?
During Fed Chair Jerome Powell’s testimony to the House Financial Services Committee he was also asked whether the United States has plans of implementing it’s own digital currency or CBDC. He replied by arguing that creating a CBDC would not definitively resolve the issues related to criminals using cryptocurrencies to avoid laws. “It depends on why people are using digital currencies. If they’re using them to evade visibility and evade the law, then for us, just to have a law-abiding CBDC won’t change that. They’ll still be able to use those currencies for that matter.” In relation to the possibility of creating a CBDC he also added “This will be something that we will invest a fair amount of time and expertise … to get it right,” Powell said, emphasizing that “we have not decided to do it.”