According to Jerome Powell, the situation with Russia “underscores the importance of effective congressional action on digital finance, including cryptocurrencies.”
Federal Reserve Pro Tempore Jerome Powell and other members of the United States House of Representatives have urged Congress to take action on crypto in response to reports that Russia may be avoiding sanctions.
In a House Financial Services Committee hearing on “Monetary Policy and the State of the Economy” on Wednesday, California Representative Juan Vargas pressed Powell on whether cryptocurrency could be a “way out” for Russia seeking financial transactions following the United States and European Union’s decision to cut Russia off from the SWIFT payments network. The Fed chairman stated that the situation with Russia “underscores the importance of comprehensive congressional action on digital finance, including cryptocurrencies.”
“There is no regulatory structure in existence that is necessary […] What is required is a framework, namely measures to prevent these unbacked cryptocurrencies from being used as a vehicle for terrorist financing and other forms of criminal activity, such as tax evasion.”
Representative Jim Himes of Connecticut reiterated Powell’s remarks during the hearing, praising the success of the sanctions against Russia. He said, however, that the United States’ failure to lead the world in regulatory clarity for cryptocurrencies left the door open to foreign states with less than benign intents.
“It is past time for all of us to take the lead in establishing a regulatory framework in which we gain from the advent of cryptocurrency, including a central bank digital currency, rather than the world’s despots, terrorists, and money launderers,” Himes stated. “It is past time for us all to act.”
On the other side of the aisle, members of the Senate Banking Committee Elizabeth Warren, Mark Warner, Sherrod Brown, and Jack Reed wrote a letter to Treasury Secretary Janet Yellen on Wednesday expressing concern that Russia and other nations could use crypto to “hide cross-border transactions for nefarious purposes,” including undermining sanctions. The legislators noted North Korea’s use of “stolen cryptocurrency” to support its nuclear weapons programme and Iran’s promotion of Bitcoin (BTC) mining while being sanctioned by the United States.
“There is growing worry that Russia may employ cryptocurrency to evade the sweeping new sanctions imposed by the Biden administration and other governments in response to its invasion of Ukraine,” the four senators stated. “This could include the use of dark web marketplaces powered by cryptocurrencies to transfer funds and conduct transactions; the use of crypto wallets and mixing services to enable sanctioned entities to transfer and conceal their wealth; and the deployment of a digital ruble to enable Russia to conduct foreign trade without converting its currency to dollars.”
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. https://t.co/4lCUNcUC29
— Elizabeth Warren (@SenWarren) February 28, 2022
The lawmakers inquired about the Treasury Department’s efforts to “ensure sanctions compliance by the cryptocurrency industry.” Additionally, the letter claimed that the Department of the Treasury’s Office of Foreign Assets Control, or OFAC, was becoming more reliant on “voluntary self-disclosure from sanctions violators for enforcement,” an approach that was “ill-suited” for the crypto field.
The OFAC released regulations effective Tuesday urging organisations and individuals domiciled in the United States not to facilitate crypto transactions addressed to specified Russian nationals and banks in accordance with the Biden administration’s sanctions. Senators Warren, Warner, Brown, and Reed, on the other hand, are requesting additional clarification from the Treasury Department by March 23 regarding OFAC’s tools, coordination with foreign governments, and other problems associated with enforcing sanctions when it comes to cryptocurrency.
“Strong enforcement of sanctions compliance in the cryptocurrency business is vital given that digital assets, which enable companies to circumvent the traditional banking system, may increasingly be exploited for sanction evasion,” the four senators stated.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.