Federal Reserve Chairman was Asked About Russia Using Crypto: His Response

By Cje95 | Congress and Crypto | 3 Mar 2022

Yesterday during his first day of testimony Federal Reserve Chairman Jerome Powell was asked a few questions that many in both crypto and traditional finance have wondered about due to the ongoing invasion of Ukraine by Russia. The questions revolved around a key thing and that is Russia using crypto to try and wiggle its way out of sanctions. His response, while cool and calculated, did answer the questions that were asked, and personally, I was very impressed with his response because it showed he does have a pretty good understanding of crypto, blockchain, and how Russia could try and use it. 


When questioned about if Russia could use Bitcoin to beat the sanctions he was quick to point out that while in theory it could be done there are several significant hurdles. Chairman Powell pointed out that at their base or core the major cryptocurrencies use blockchains with a publically available ledger to see transactions. This allows for the transactions to be tracked and highlighted partnership that the government has with several different firms that keep an eye on large transactions and ones that could be used for nefarious purposes like Chainalysis and others. With all of this being public and able to be tracked it would be extremely hard for Russia to move any significant amount of money into crypto and then hide it. He also stated that currently their assets abroad they would want to bring back are frozen so they cannot access them anyway to move even with this method. 


When asked about the current state or how the crypto realm is working/regulated he did compare it to both something we have often heard but also another thing that I actually looked up. He did say that it was like the early days of the internet which is a critique that most of us have heard but the one that caught me off guard was how he compared it to the early days of the railroad in the US! Turns out when railroads really kicked off it was a wild wild ride for all involved with a huge boom and bust cycle and honestly was pretty fascinating to read about. 


To address this and to help prevent another dot com like implosion the Chairman continued what he has said before and that is there is a need for a framework for the Fed to work with. People are united in not having crypto being used for criminal activities or tax dodging but with what the Federal Government has passed there are a lot of unclear and unanswered questions. Clear framework would benefit everything he said and was something he was hoping Congress would pass soon. 


He was also asked about the Fed issuing a central bank digital currency and if it would be helpful. In his response, he highlighted that the Fed had released a paper late last year and opened up a public comment time period. Currently, the paper is still in the public comment period pertaining to the pros and cons but he is anxious to see what the comments say and investigate it further. One thing that I have not noticed Chairman Powell comment on before is that if, and that is a huge if, a CBDC is launched it would require significant capital to launch and get everyone on board. With this in mind, they will have to look into if it will be cost-effective to even to at this point or something that isn't possible at the time. 


Something else that will have to be investigated is why for instance people are using a cryptocurrency. If people are using unbacked cryptos it might not be helpful to launch a CBDC at all. He pointed out that a lot of the cryptocurrencies are based on pure speculation and more often than not lack utility. In this instance, a CBDC would not be as helpful because the people investing and using these are doing it as an investment with the coin increasing in value. That is not something that would happen with a CBDC as it would remain stable. 


The one thing he made very very clear and continued to state throughout the time he answered these questions is that no decision had been made. Right now they are on more of a fact-finding mission and looking into the technology and if it is even cost-effective to get into! 


Please know I am not a financial advisor I am just someone who picked up on a trend and wanted to express it! Makes sure you always do your own research and never invest money you cannot afford to lose! If you enjoyed this article and would like to further support me below are a couple of referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_


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Graduated from Texas A&M in May of 2020 had dabbled in crypto since 2017 but dove in at the end of 2019. December of 2020 packed up and moved to D.C.! Huge sports fan, space nerd, and international newsreader! Follow me on Twitter @Cje95_

Congress and Crypto
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