US Lawmakers and Fed Chairman Push for Crypto Regulation Following Russian Sanctions

Federal Reserve Chairman Pro Tempore Jerome Powell and some members of the US House of Representatives have called for congressional action on crypto in response to talk of Russia possibly evading sanctions.

During a Wednesday House Financial Services Committee hearing on “monetary policy and the state of the economy,” California Rep. Juan Vargas asked Powell if cryptocurrency could be an “out” for Russia seeking financial transactions in the wake of the United States. and the European Union cutting the country off from the SWIFT payment network. The Fed Chairman said the situation with Russia “underscores the need for real congressional action on digital finance, including cryptocurrencies,” adding:

“There is not the type of regulatory framework in place that needs to be there […] What is needed is a framework, specifically ways to prevent these unbacked cryptocurrencies from being used as a vehicle for terrorist financing and just general criminal behavior, tax evasion, etc.

Jerome Powell speaking to the House Financial Services Committee on March 2

Connecticut Representative Jim Himes echoed Powell’s sentiment during the hearing, praising the effectiveness of sanctions against Russia. However, he added that the US not leading the world in cryptocurrency regulatory clarity leaves the door open to foreign nations that may not always have the best intentions.

“It is time, in fact, it is high time for all of us to lead the creation of a regulatory environment in which we, rather than the despots, terrorists and money launderers of the world, benefit from the emergence of cryptocurrency, including a digital central bank currency,” Himes said. “It’s time for all of us to act.”

On the other side of the hill, Senate Banking Committee members Elizabeth Warren, Mark Warner, Sherrod Brown and Jack Reed wrote a letter to Treasury Secretary Janet Yellen on Wednesday expressing concern that Russia and d countries could use crypto to ‘hide cross-border transactions’. for nefarious purposes,” including the weakening of sanctions. Lawmakers cited North Korea using “stolen cryptocurrency” to fund its nuclear weapons program, and Iran promoting Bitcoin (BTC) mining under US sanctions.

“There are growing concerns that Russia is using cryptocurrencies to circumvent new blanket sanctions it faces from the Biden administration and foreign governments in response to its invasion of Ukraine,” said the four senators. “This could include using dark web markets powered by cryptocurrencies to move funds and conduct transactions; the use of crypto wallets and mixing services that allow sanctioned entities to transfer and hide their wealth; rollout of a digital ruble that would allow Russia to conduct foreign trade without converting its currency to dollars.

The lawmakers requested information on what actions the Treasury Department is taking to “enforce the cryptocurrency industry’s compliance with sanctions.” The letter also implied that the department’s Office of Foreign Assets Control, or OFAC, was increasingly reliant on “voluntary self-disclosure by sanctions violators for enforcement,” an approach “ill-suited” to the crypto space.

Related: Crypto Could Circumvent President Biden’s ‘Devastating’ Sanctions on Russian Banks and Elites: Report

OFAC on Tuesday issued a rule warning U.S.-based businesses and individuals not to facilitate crypto transactions sent to certain Russian nationals and banks, in accordance with sanctions ordered by the Biden administration. However, Senators Warren, Warner, Brown and Reed are seeking further clarification from the Treasury Department on OFAC’s tools, coordination with foreign governments and other sanctions enforcement challenges when it comes deals with cryptocurrencies by March 23rd.

“Strict enforcement of sanctions compliance in the cryptocurrency industry is essential, given that digital assets, which allow entities to circumvent the traditional financial system, can increasingly be used as a tool to escape sanctions,” the four senators said.

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