US Lawmakers Look To Tighten Grip On Crypto To Ensure Sanctions On Russia Are Effective

U.S. federal regulators are looking to tighten the regulation on cryptocurrencies to prevent them from acting as a tool for Russia to circumvent sanctions.

What Happened: Federal Reserve Chairman Pro Tempore Jerome Powell and multiple members of the House of Representatives called for congressional action on cryptocurrencies as a reaction to their potential use by Russia to avoid sanctions during the Wednesday hearing of the Committee on Financial Services. Powell said the crisis involving Russia "underscores the need for really congressional action on digital finance, including cryptocurrencies."

See Also: IS REGULATION BAD FOR CRYPTO?

During the hearing, Rep. Juan Vargas (D -Calif.) asked Powell if Russia could turn to crypto following the U.S. and European Union cutting the country off from the SWIFT payment network. Powell answered by highlighting that quick congressional action to regulate crypto is needed.

According to the Federal Reserve chairman, there is a need for "a framework, in particular ways to prevent these unbacked cryptocurrencies from serving as a vehicle for terrorist financing and just general criminal behavior, tax avoidance and the like." He also highlighted that the current regulation is not sufficient and "there isn’t in place the kind of regulation framework that needs to be there."

Rep. Jim Himes (D-Conn.) concurred with Powell and added that the U.S. not leading crypto regulation allows bad actors to take advantage of those technologies. He said, "It is past time for all of us to lead on creating a regulatory environment in which we rather than the world’s despots, terrorists and money launderers benefit from the emergence of cryptocurrency including a central bank digital currency."

Senate Banking Committee members Elizabeth Warren (D-Mass.), Mark Warner (D-Va.), Sherrod Brown (D-Ohio) and Jack Reed (D-R.I.) also wrote a letter to Treasury Secretary Janet Yellen on Wednesday raising concern that Russia could leverage crypto to “hide cross-border transactions for nefarious purposes" and undermine sanctions. The letter points out "there are growing concerns that Russia may use cryptocurrencies to circumvent the broad new sanctions it faces from the Biden administration and foreign governments in response to its invasion of Ukraine." The four senators in question also fear the "deployment of a digital ruble that would allow Russia to conduct foreign trade without converting their currency into dollars.”