In a hearing on “Monetary Policy and the State of the Economy” before the House Financial Services Committee, Powell said the situation with Russia’s invasion of Ukraine underscores the need for lawmakers to enact digital finance legislation, including cryptocurrencies.
U.S. Rep. Juan Vargas (D-California) asked Powell if cryptocurrency provides an end run for Russians seeking to make financial transactions despite being banned from the Swift payments network.
In response, Powell said regulations are not in place to police such activity.
“There isn’t in place the kind of regulation framework that needs to be there,” he said. “What’s needed is 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.”
U.S. Rep James Himes (D-Conn.) praised sanctions against Russia, but noted the U.S. is not a world leader when it comes to the regulating cryptocurrencies. As a result, he said, it has left the door open for bad actors across the globe.
“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,” he said. “It is time for all of us to act.”
The discussion comes as the European Union is examining ways to guarantee digital assets aren’t used to dodge sanctions against Russia.
Read more: EU Eyes Tougher Measures to Block Crypto Use to Circumvent Sanctions
The 28-nation bloc is trying to enforce the financial penalties on Russia as part of the action taken by Western powers in the wake of the invasion of Ukraine.
