Powell is speaking on the status of the economy before the House Financial Services Committee.
Fed Pro Tempore Jerome Powell said that Russia’s invasion of Ukraine may highlight the need for cryptocurrency regulation in order to prevent sanctioned persons from evading sanctions via the use of cryptocurrencies.
“[The Ukraine-Russia conflict] reaffirmed the critical need of Congressional action on digital finance, including cryptocurrencies,” Powell added. “We have a booming sector with several components that lacks the necessary regulatory framework.”
The Fed Chair was replying to a question about whether Russia may circumvent sanctions by using cryptocurrency. The United States, the European Union, and other countries have put financial sanctions on Russia in an attempt to coerce it into withdrawing from its invasion of Ukraine. Earlier on Wednesday, the European Union shut off access to the SWIFT interbank messaging system to seven of Russia’s top banks.
Powell cited the danger that terrorists or other evil actors may utilise cryptocurrencies as another reason for further regulation.
Powell is scheduled to speak before the House Financial Services Committee on Wednesday on the economy and monetary policy. On Thursday, he will testify before the Senate Banking Committee.
Rep. Juan Vargas (D-Calif.) inquired about the Federal Reserve’s latest research on central bank digital currency. Powell cited the materials and said that the Fed is soliciting a public response.
“This will be something in which we will devote considerable effort and experience… in order to do it right,” Powell said, underlining that “we have not chosen to do it.”
The issue of whether the advantages of a CBDC exceed the drawbacks remains unsolved, he added. Powell also signalled that the US central bank will attempt to contain inflation later this year by boosting interest rates. He said that the central bank was on the verge of raising its policy rate, but that the Ukraine crisis may have altered expectations.
Nonetheless, he told Congress that he expects inflation to peak and then “fall” by the end of this year. Powell said that he is leaning toward imposing and approving a 25-basis-point rate rise in March.
Since the Federal Open Market Committee’s two-day meeting in March, traders have been pricing in a probable rate rise, but the magnitude of the increase remained unknown until today.
The CME Group’s FedWatch tool indicated this morning that futures traders now perceive a 90% possibility of a quarter-percentage point raise, down from a 50% chance only a week ago.
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