Facebook's imminent decision to offer a digital currency will create a new regulatory minefield for a company whose privacy practices have already provoked attacks from US and European lawmakers.
The closely watched The crypto-currency initiative, still heavily debated, codenamed "Project Libra", could become a major e-commerce tool for Facebook users via the suite of social network services, ranging from Instagram to Messaging. But as with other crypto-currencies such as Bitcoin, the new piece of Facebook could become a tool for Money launderers and financiers of terrorism, a risk that has attracted the attention of legislators and regulators.
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The project is expected to be unveiled on Tuesday, where more details will be published.
A Facebook equivalent of Bitcoin could allow users to buy popular Instagram influencers products faster and easier than with money – while staying in the social media domain of the company. And especially for Facebook shareholders, the company could earn money by paying fees for each transaction processed.
"Facebook could use cryptocurrency as a means of payment to remove friction between its various services," said Merrill Lynch analysts in a June 14 report. "We view this launch as an important initiative for the company as it creates a more private messaging ecosystem with e-commerce capabilities."
The global coin should initially be available in about 12 countries, including the United States and the United Kingdom. The use of the digital asset would not require a bank account and its value would be tied to a group of currencies established and guaranteed by the state, such as the dollar and the pound sterling, according to media reports . The operation would be based in Switzerland.
But with this big step in the tightly regulated financial world, the company will expose itself to a type of regulatory intrusion that is not common in his traditional realm Online media. According to experts, one of the main concerns is the possibility that Facebook's global coin will be exposed to money laundering through the company's main website and sister platforms, WhatsApp and Instagram. .
"The Facebook coin will make money laundering what Facebook has done for misinformation, which will likely lead to an explosion in the financing of terrorism," said Charlie Delingpole, CEO of Comply Advantage, a consulting firm. fight against money laundering.
Bank of England Governor Mark Carney met with Facebook founder and CEO Mark Zuckerberg to discuss these plans in April, according to the Guardian.
The following month, Americans Mike Crapo (R-Idaho) and Sherrod Brown (D-Ohio), the two main members of the Senate Banking and Banking Committee, wrote to Zuckerberg asking how the Facebook cryptocurrency system works. would work.
"What steps are financial regulators taking to ensure that it meets all legal and regulatory requirements?" Asked the senators in their letter of May 9. A spokeswoman for Crapo said the senator had not received a response from Facebook.
The Trump administration has looked at digital currencies with caution.
Last month, Treasury Secretary Steven Mnuchin said his department was monitoring cryptocurrencies to block funds for illicit activities.
Earlier this year, another treasury official said crypto-currencies are tools – like cocaine and Rolls Royces – that criminals are increasingly using to store value and are an "extremely high" concern for national security and the application of sanctions in the United States.
A Congressional Hearing in the House or Senate to Ask Answers to Facebook Managers About the Operation of Its Cryptocurrency Product Is Probable in the Months to Come, Lawyers Says involved in the digital asset sector who refused to give their name to freely talk about the company.
A spokesman for Facebook declined to comment.
In the European Union, which already applies strict regulations to payment companies, a new rules package will come into force next year, just as Facebook will have to create momentum for its coin product.
The Fifth European Anti-Money Laundering Directive, or AMLD5, enters into force on 10 January and introduces stricter requirements for the identification of beneficiaries of transactions and the collection and sharing of information. , especially for the operators of digital resources and prepaid cards.
Tens of billions of dollars in fines for alleged LMA-related wrongdoing over the years for banks around the world.
"Some regulators, some of whom are fundamentally opposed to cryptocurrency and Bitcoin since the first day, will see [Facebook’s] The global currency is a tool that could potentially be used for money laundering, "said Jay Zhou, marketing director of Loopring, an open source protocol for creating decentralized exchanges. "It will be up to Facebook to prove to them that they are wrong."
With a cryptocurrency product, Facebook will have to comply with the same money transfer laws as those applied to banks and companies such as Western Union.
As part of its regulatory checklist, it is likely that Facebook will need a "BitLicense" from New York. State, said Sarah Brennan, a partner at the Lippes Mathias law firm in Buffalo, NEW YORK.
BitLicenses licenses, awarded by the state's financial services department, have been handed over to conventional cryptocurrency companies such as Circle Internet Financial and Gemini Trust Co.'s Winklevoss Twins. Any company wishing to make digital currency transmissions will probably need New York's authorization. .
Facebook has discussed with the Commodity Futures Trading Commission its digital currency project, reported the Financial Times earlier this month. The company will also have to go to the SEC if it wants its parts exchanged by people separate from the company's platforms. The SEC would seek to regulate Facebook's pieces as security if the product is designed to be transferred to third-party digital portfolios, Brennan said.
A spokesman for the SEC declined to comment.
Facebook will want his piece to be widely available, Brennan said. "It's a much more convincing product from a business point of view," she says. "It looks like they're definitely planning it. You do not get anything if you offer it to your employees as a salary and they can not redeem it for anything other than Facebook. "