Treasury Secretary Steven Mnuchin has concerns about Facebook’s proposed cryptocurrency and its potential illicit use.
In a press conference Monday, Mnuchin said Facebook’s planned digital currency “could be misused by money launderers and terrorist financiers” and that it was a “national security issue.”
“Cryptocurrencies such as bitcoin have been exploited to support billions of dollars of illicit activity like cyber crime, tax evasion, extortion, ransomware, illicit drugs and human trafficking,” Mnuchin said, adding that he is “not comfortable today” with Facebook’s launch.
“They have a lot of work to do,” he said.
The press conference comes days after President Donald Trump said in a tweet that he was “not a fan” of cryptocurrencies like bitcoin. He also suggested Facebook, which plans on launching the global cryptocurrency next year, would need a bank charter to do so. Bitcoin dropped sharply on Monday following the president’s criticism on Twitter. The world’s first and most valuable digital currency fell roughly 10% to a low of $9,872 to start the week.
“The president does have concerns as it relates to bitcoin and cryptocurrencies — those are legitimate concerns that we have been working on for a long period of time,” Mnuchin said.
In response to the Treasury secretary’s comments, Facebook told CNBC that “they anticipated critical feedback from regulators, central banks, lawmakers around the world.” The tech giant also said they announced Libra a year before its anticipated launch date, “so that we could have those conversations.”
Facebook’s David Marcus, head of Facebook’s Calibra digital wallet that will be used to store Libra, is scheduled to testify before the committee on Tuesday. The House Financial Services Committee will hold its own hearing focused on Libra on Wednesday. Marcus responded to questions from the U.S. Senate Banking Committee in a letter last week, saying the company needs governments, central banks and regulators involved to properly launch the digital asset and Facebook “can’t do this alone.”
Mnuchin said Treasury had been clear with Facebook — as well as bitcoin users — that they need to implement the same anti-money-laundering and counter-terrorism safeguards as other financial institutions.
“With respect to Facebook’s Libra and other developments in cryptocurrencies, our overriding goal is to maintain the integrity of our financial system and protect it from abuse,” he said. “We will not allow digital asset service providers to operate in the shadows.”
In June, Facebook announced that it would launch a cryptocurrency run by the nonprofit Switzerland-based Libra Association in 2020. The digital asset will not be controlled or fully run by Facebook, according to its white paper. Instead, it’s being run by a number other stakeholders that include Uber, Mastercard, Stripe, Visa, PayPal and Spotify. Still, Facebook has plans to profit from it through a new subsidiary, Calibra, that is building a digital wallet to store and exchange the cryptocurrency.
Others in Washington have also called for more clarity surrounding Facebook’s project. Federal Reserve Chairman Jerome Powell said last week that he had “serious concerns, ” including money laundering and consumer protection, and set up a working group within the central bank to examine it. Congress members from both political parties have also questioned Facebook’s motives. Rep. Maxine Waters, D-Calif., chairwoman of the House Financial Services Committee, asked the tech giant to delay the project, which she said was a continuation of its “unchecked expansion and extending its reach into the lives of its users.”