Palo Alto: Facebook Inc. faced its latest Washington crisis Monday, with Treasury Secretary Steven Mnuchin joining a parade of policymakers and politicians who’ve bashed its proposed cryptocurrency, demonstrating the hurdles the company must overcome to ever make the token a reality.
Speaking from the White House, Mnuchin said he has serious concerns about the national security implications of Facebook’s coin and other virtual currencies. He said the potential for money laundering and other illicit activities is high, and vowed that Treasury would crack down on law breakers when it finds them.
“This is indeed a national security issue,” Mnuchin said in a briefing for reporters at the White House. “We will not allow digital asset service providers to operate in the shadows.”
Bitcoin pared an earlier decline after Mnuchin’s comments, and was down 9.6 per cent to $10,765.78 at 2:42pm in New York.
He is far from the first official to express scepticism. President Donald Trump took to Twitter July 11 to criticise Facebook’s effort, saying he’s not a fan of Bitcoin and that cryptocurrencies are often used to facilitate “unlawful behaviour.” And some of Trump’s staunchest foes in Congress, including Representative Maxine Waters, have also faulted Facebook, going so far as to demand that the company halt all work on the coin, called Libra.
Federal Reserve Chairman Jerome Powell chimed in last week, telling lawmakers that he has “serious concerns” about the token and cast doubt on Facebook’s timeline for launching it by next year.
The opposition from both Republicans and Democrats might put fresh pressure on Facebook — already under fire in Washington over scandals tied to data privacy — to assess whether its cryptocurrency is worth it. The fireworks will start again tomorrow when the company faces a hearing before the Senate Banking Committee followed by another Wednesday before the House Financial Services Committee.
In prepared remarks before the Senate panel, the top Facebook executive working on Libra, David Marcus, went further than the company has previously to try to assuage policymakers’ concerns that the coin could be a threat to the financial system.
Marcus said the token won’t launch until regulatory questions are fully addressed and he added that Facebook will get “appropriate approvals.” He said the coin isn’t intended to compete with countries’ sovereign currencies and won’t interfere with central banks on monetary policy.
“The time between now and launch is designed to be an open process and subject to regulatory oversight and review,” Marcus wrote. “We know we need to take the time to get this right. And I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.”
In his remarks, Mnuchin said that Treasury’s Financial Crimes Enforcement Network “will hold any entity that transacts in Bitcoin, Libra or any other cryptocurrency to its highest standards.” He broadly criticised cryptocurrencies, echoing Trump, who said in his series of tweets last week that they are “not money.”
“Bitcoin is highly volatile and based on thin air,” Mnuchin said. “We are concerned about the speculative nature of Bitcoin and will make sure that the US financial system is protected from fraud.”
Mnuchin said he would address the issue with the finance ministers from other major global economies at a Group of Seven summit in France this week. He’s also discussed the issue “extensively” with the Fed’s Powell, he said.
The sentiment poses risk for the broader digital coin industry. In the run-up to this week’s hearings, a number of competing digital coin companies are distancing themselves from Facebook. Some industry groups are also conducting briefings for congressional staff, pointing out that Facebook’s plan is light on details and not necessarily representative of all tokens.
For Facebook, Mnuchin indicated that US approvals may take a while.
“They and others have a lot of work to do before they get us comfortable,” he said. But he said the company is “being very candid with the administration and where they are.”
Trump said four days ago that companies issuing cryptocurrency, including Facebook, should be subject to banking regulations.
Mnuchin said the president has “legitimate concerns.” He advised investors to “be careful” before purchasing Bitcoin or other cryptocurrencies. “There’s a lot of good things to invest in,” he said.
“I have no idea why Bitcoin trades where it is,” Mnuchin said. “I’m not commenting whether it’s high or it’s low.”