Fed Chairman Argues War Between Russia and Ukraine Accentuates Need for Crypto Regulation

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Fed Chairman Argues War Between Russia and Ukraine Accentuates Need for Crypto Regulation By Hannah Perez

Powell first gave concrete notice of a key interest rate hike this month. Although he added that the conflict between Russia and Ukraine threatened “highly uncertain” consequences for the US economy.

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US Federal Reserve Chairman Jerome Powell said Russia’s gunfight in Ukraine could highlight the need for regulation of the cryptocurrency market. He argued that sanctioned entities or individuals can use these types of assets to evade economic blockades.

the news medium CoinDesk collected in an article published this Wednesday, where he cites the words of the president of the FED:

[La invasión rusa de Ucrania] underscored the need for congressional action on digital finance, including cryptocurrencies. We have this thriving industry that has many parts and there is not the kind of regulatory framework that should exist.

Cryptocurrencies can be used to circumvent sanctions

The central bank president’s comments came during a meeting with the US House Financial Services Committee on the state of the economy. In particular, Powell was answering a question about whether Russia could use cryptocurrencies to circumvent sanctions imposed by Western allies.

as reported DailyBitcoinThe US, Canada, and Europe have banded together to issue sanctions against Russia in an effort to isolate the country from the global financial system and try to stop the war. Major Russian banks were removed from the SWIFT interbank payment system. Sanctions have also been issued to Russia’s central bank and several top officials, including Russian President Vladimir Putin. The measures prohibit citizens of allied countries from transacting or doing business with sanctioned Russian entities and individuals.

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During the meeting, Powell touched on the possibility that terrorists or other malicious actors could use digital currencies to bypass blockades and move capital out of Russia. He cited this reason as an example of the need for additional regulation.

This Wednesday the European Union ad the blockade of another seven large Russian banks, as part of a series of sanctions for the invasion of Ukraine. The measure will eliminate VTB Bank, Bank Otkritie, Novikombank and others from SWIFT. Even though Sberbankthe largest bank in Russia, and Gazprombankits third-largest lender, are not on the list.

Visa and master card announced Tuesday that they were heeding orders to block Russian financial institutions from their payment networks.

FED is ready to raise interest rates

Powell also discussed the Fed’s plans to raise interest rates. He said that the central bank is ready to apply the anticipated increase, but that the situation in Ukraine may have changed expectations.

As reviewed CoinDesk, the central bank is on track to raise interest rates this month for the first time in three years, due to high inflation, a tight labor market and strong economic demand. The outlet quoted Powell’s words:

With inflation well above 2% and a strong labor market, we expect it will be appropriate to raise the target range for the fed funds rate at our meeting later this month.

The president said he is ready to support a 25 basis point rate hike in March and shared Congress’s concern about inflation, which is currently at its highest level in four decades. Despite this, Powell reiterated his belief that inflation will ease this year as supply constraints ease and demand moderates due to the tapering effects of fiscal stimulus and tighter monetary policy.

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We are alert to the risks of further potential upward pressure on inflation expectations and inflation itself due to a number of factors.“, said. We will use our policy tools as appropriate to prevent higher inflation from taking hold”. Powell added that the implications of the war for the US economy are “highly uncertain”.

Fed Actions, Geopolitical and Crypto Landscape

During the meeting, the president also addressed the issue of a central bank digital currency (CBDC), according to the publication. When asked by Congressman Juan Vargas about the FED’s reports on the study of issuing a digital dollar, Powell assured that the bank is seeking public comments, although he advanced that “we have not decided to do it“.

This will be something we will invest a good amount of time and experience in… to get it right.“said the president. Whether the benefits outweigh the costs of a CBDC is an unanswered question, he added.

The issues addressed by the director of the FED have been at the center of analysts’ attention in recent weeks, due to the pressure exerted on the markets. Especially the issue of rising interest rates has generated wild moves in stocks and the digital currency market in recent months.

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Bitcoin hit USD $45,000 on Wednesday after dipping below $35,000 last week following the Russian invasion. However, the cryptocurrency failed to hold onto the bullish mark and dipped slightly shortly after the Fed’s remarks. At the time of editing, Bitcoin hovers around $44,000 and major cryptocurrencies appear to be holding steady.

Fed Chairman Argues War Between Russia and Ukraine Accentuates Need for Crypto Regulation
Evolution of the price of Bitcoin in the last 24 hours – CoinMarketCap

The Fed’s measures to inject liquidity into the market amid the spread of COVID-19 favored the narrative of Bitcoin as a store of value asset. But more recently, expectations about the bank’s measures to contain inflation have dampened investor appetite for the digital currency. At the same time, several analysts have agreed that BTC should be viewed more as a risky asset than a hedge for inflation, pointing to a bearish performance for crypto in the short to medium run.

On the other hand, some observers have pointed out that the war in Eastern Europe may represent a new test scenario for Bitcoin. Among them, billionaire investor Bill Miller sees BTC it has the potential to serve as a safe asset during periods of international unrest. Said that the current geopolitical situation surrounding Russia “is very bullish for Bitcoin“.


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Article by Hannah Estefanía Pérez / DailyBitcoin

Image designed by nicole leon for DailyBitcoin

WARNING: This is an informative article. DiarioBitcoin is a means of communication, it does not promote, endorse or recommend any investment in particular. It is worth noting that investments in crypto assets are not regulated in some countries. May not be suitable for retail investors as the full amount invested could be lost. Check the laws of your country before investing.

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