US Federal Reserve says Russia sanctions highlight need for crypto regulations

The chairman of the US Federal Reserve, Jerome Powell, has called for a comprehensive regulatory framework for digital assets amid the conflict between Russia and Ukraine. Powell’s remarks are similar to those of Christine Lagarde, the president of the European Central Bank.

Powell was speaking at the House Financial Services Committee, where he talked about the state of the economy and the state of the monetary policy.

Calls for crypto regulation

Powell gave testimony on Wednesday, where he addressed whether Russia could use cryptocurrencies to evade the sanctions that have been placed on the country by the US its Western allies.

Powell noted that the Russia-Ukraine crisis “underscored 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 there.”

Cryptocurrencies advertise themselves as free from government control. Crypto users can conduct peer-to-peer transactions through self-custodial wallets, making it hard for governments to enforce restrictions on the sector. This has now raised concerns among Western countries that believe Russia will use cryptocurrencies to avoid sanctions.

Powell has also addressed other risks with an unregulated cryptocurrency sector, including terrorism financing and money laundering. However, the Federal Reserve is not planning to impose a blanket ban on cryptocurrencies like China.

Crypto exchanges under pressure

Cryptocurrency exchange platforms have been under pressure to freeze the accounts of users in Russia. Earlier, the Ukrainian government urged all the major exchanges to blacklist Russian and Belarusian addresses. However, exchanges such as Kraken, Binance and Coinbase have said they cannot impose a unilateral ban on all users.

Hillary Clinton, a former US presidential candidate, said he was not pleased with this decision by exchanges. She noted that a more comprehensive regulatory framework for digital assets was needed because of this. She noted that Russia should not be given a chance to escape these sanctions.

Nevertheless, cryptocurrencies also play an integral role in Ukraine, as over $36 million worth of crypto has been donated towards Ukrainian users and its military. Bitcoin, Ethereum and Polkadot make for the largest portion of these donations.

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