WASHINGTON – Treasury Secretary Steven Mnuchin said on Monday that he was "very seriously" worried about crypto-currencies, including the one developed by Facebook, the latest indication that Washington is preparing to exercise its power on digital currencies.
At a meeting in the White House, Mnuchin said that cryptocurrencies posed a threat to national security because they could be used to finance illegal activities. He also said that the Trump administration was "not comfortable" with Facebook's plans to launch a digital payment system, called Libra.
The warnings follow similar comments by President Trump, who said in a statement series of Twitter posts Last week, he was "not a fan" of crypto-currencies and their value was volatile and "based on a breath of air". Mr. Trump warned Facebook that he needed to look for a bank charter and comply with all the banking regulations of digital currency business.
The Trump administration has talked little about crypto-currencies in the last two years, despite their growing popularity. Mnuchin has widely described the new technology of creating, transferring and storing money as a potential problem of consumer protection rather than a threat to the financial system. Regulators have long focused on ways to minimize crime in the cryptocurrency sector, but it was usually an insidious issue that did not attract much public attention.
But the announcement of the Libra by Facebook has sparked Washington's interest in cryptocurrencies.
The Chairman of the Federal Reserve, Jerome H. Powell, said last week that the central bank had "serious concerns" about Libra and had been in contact with Facebook about his project.
This week, the House and Senate will hold hearings to review Libra and lawmakers plan to bring David Marcus, the Facebook executive who oversees the project, to the grill. Facebook was asked to stop working on the project until it meets the concerns of lawmakers.
Facebook's crypto-incursion has renewed attention on the thousands of cryptocurrencies that have flourished after the original digital currency, Bitcoin, which was released in 2009 and envisioned as a new kind of money that would only be controlled neither by a government nor by a central authority.
Bitcoin was introduced by its mysterious creator, Satoshi Nakamoto, as an essentially political project aimed at challenging central banks and governments.
But from the beginning, Bitcoin has gained popularity among people seeking to carry out illegal transactions online. The Silk Road, an online market for illegal drugs, was launched in 2011 and has become a booming business, with every payment sent to Bitcoin.
In recent years, many legitimate businesses have been created around crypto-currencies. Most of these companies focus on using Bitcoin and other cryptocurrencies as investment products, similar to gold.
Several leading financial institutions, including Goldman Sachs and Fidelity, have started offering Bitcoin-related products to their customers.
This general validation has helped give Bitcoin a bit of legitimacy and boost the price of the digital token. But this has also led to increased volatility in the price of Bitcoin and other cryptocurrencies.
The price of a simple Bitcoin climbed to nearly $ 20,000 in early 2018. Since then, it has dropped to $ 3,000, but has risen again in recent months to about $ 12,000.
Bitcoin has also become the standard currency for ransomware operations in which victims lose control of their computers to the benefit of remote hackers. Victims can only recover their files if they send a Bitcoin payment. Many cities have lost control of their computer networks in this type of attack.
On Monday, Mr Mnuchin discussed the use of Bitcoin in the financing of terrorism, tax evasion and human trafficking, although up to now, officials of the Law enforcement has reported only few cases in these areas.
"The Treasury Department has expressed serious concerns about the misuse of Libra by money launderers and financiers of terrorism," he said.
Facebook does not intend to publish the currency until next year, but the company has great ambitions for the project, which, she hopes, will become a new world currency and the basis of an alternative global financial system.
These ambitions – and Facebook's broader reputation issues – have made this project such a controversial subject.
"We know we have to take the time to get it right," said Marcus, the Facebook executive, in a testimony released on the eve of the Senate Committee on Banking and Finance's hearing. banks. "And I want to be clear: Facebook will not offer Libra digital currency until we fully resolve regulatory issues and obtain the appropriate approvals."
Facebook has designed Libra to be run by a Swiss association run by at least 100 companies and other partners, not just Facebook.
When Facebook announced that Libra already had 27 partners, including major players like Uber, Mastercard, Visa and Spotify. But until now, these partners have remained largely silent and Facebook has been hit by the scrutiny that Libra is facing.
It is clear that Facebook will face a host of new regulations and scrutiny from the public.
Mr. Mnuchin said that cryptocurrencies must comply with the Banking Secrecy Act and register with the Financial Crimes Enforcement Network. They must also respect the same standards against money laundering and counterfeiting as traditional financial corporations.
The Treasury Secretary also expressed concerns about the speculative nature of Bitcoin and the Facebook issues that protect the privacy of its users.
"Our overriding goal is to maintain the integrity of our financial system and protect it from abuse," said Mnuchin.
The Trump administration's concerns about Libra seem to be linked to the president's more general mistrust of the social networking giant. Mr. Trump tweeted about Libra soon after a Social media summit during which he criticized Facebook and other big tech companies, accusing them of silencing conservative voices, including his own.
Mr. Mnuchin insisted that the administration was not trying to retaliate against Facebook. "No, we will not target any entity," he said. "Everyone respects the same rules."
Fed Chairman Powell expressed the same concern about Libya last week. He told lawmakers that "they could not go ahead" without much satisfaction with the way the company handled money laundering, etc. consumer protection concerns Consumers, stating: "All of these issues will need to be addressed very thoroughly and carefully, as part of a deliberate process that will not be an accelerator for implementation."
Skepticism about Libra, and more broadly about cryptocurrencies, is a rare problem in which the Trump administration and some Democrats are united. Last week, Senator Sherrod Brown, a Democrat from Ohio, called on the Fed to protect consumers from Facebook's "monopoly currency."
"The largest banks and the largest technology companies are not acting in the interest of working Americans, but in their interest and that of their investors," said Brown. "The Fed must play a proactive role in ensuring that the payment system remains accountable to the public."
However, Republicans have tended to be more understanding of the cryptocurrency sector and have presented it as a goal that the government should strive to protect in order to defeat government and corporate power. .
Just this week, Representative Kevin McCarthy, Leader of the Minority in the House, In an opinion piece published in the New York Times, the cryptocurrencies and networks they create could provide a response to the privacy scandals facing Internet giants.
Trump's interim chief of staff, Mick Mulvaney, has been a strong advocate of Bitcoins in the past.