Chairman of the Federal Reserve, Jerome Powell, has stated that recent events of the conflict have allowed us to perceive the need for regulations on crypto
The Fed Chairman Jerome Powell, restated that there is a growing need for cryptocurrency regulations during a testimony before the House Financial Services Committee.
Powell said recent events in the conflict between Russia and Ukraine have “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,” he said when questioned about how Russia may be using crypto as a work-around for the sanctions recently imposed by different countries as an attempt to stop the attack over Ukraine.
Regulating Crypto and Jerome Powell
In light of current events, Russia is the main focus for the creation of these regulations, however, the Fed Chair has brought up the issue of what he considers an unregulated market in previous occasions.
In July last year, Powell told Congress that stablecoins, cryptocurrency tokens that are fixed to fiat currencies such as the dollar, should be regulated in comparable ways to bank deposits and money market mutual funds.
“Commercial paper are short-term overnight obligations from companies, and most of the time they’re investment grade, most of the time they’re very liquid, it’s all good. But during recent financial crises, the market just disappears,” he stated.
“That’s when people will want their money. It’s very simple: these are economic activities very similar to bank deposits and money market funds, and they need to be regulated in comparable ways.”
In January this year, Powell announced the Fed would soon release a report on Central Bank cryptos and other digital currencies.
Gary Gensler, chairman of the Securities and Exchanges Commission (SEC) has repeatedly raised the need for tougher crypto regulation in the American regulatory spheres.
Last year, he warned that DeFi (Decentralized Finance)—shorthand for tools that enable non-custodial crypto trading without intermediaries—would “end poorly” without greater customer protection laws. He has also previously said the DeFi industry could be spreading without control with unregistered securities and that in itself could be a big risk for customers.