July 16, 2019 | AtoZ Markets - During a recent press conference, the U.S. Treasury Secretary Steven Mnuchin voiced the Trump administration’s concerns with Facebook Libra and Bitcoin.
US Treasury and the US President share the same opinion on Facebook Libra
Recently, Donald Trump in his Tweeter made it clear that he personally does not support the Facebook Libra coin and Bitcoin, calling the most popular crypto “no money”. Mnuchin’s statements mirror the Presidents opinion on digital assets, who believes that cryptocurrencies can “facilitate unlawful behavior.”
The U.S. Treasury official also repeated statements made by different national authorities around the world in regards to upcoming Facebook Libra. He also mentioned the possible use of the new stablecoin by criminals, as one of the main risks that Facebook Libra holds.
Mnuchin named several examples of crimes, that could be facilitated by cryptocurrencies, including money laundering, terrorist financing, extortion, human trafficking, drug trafficking, and tax evasion. “This is indeed a national security issue,” the US Treasury official concluded.
What potential risks Facebook Libra holds?
It is worth highlighting two main points related to crypto companies, that Treasury Secretary's speech, focused on, during the half-hour press conference:
(1) clear guidance about how custodians must comply with FinCEN’s Bank Secrecy Act (BSA) as money transmitters;
(2) export those policies abroad through the Financial Action Task Force ;
The Financial Crimes Enforcement Network (FinCEN) has already taken into consideration the issue of Facebook Libra potential use in illicit financial activities.
During the briefing on the use of AI and Machine learning, last month, Representative, Emanuel Cleaver II noted that Facebook has already shown its inability to identify and impede crypto fraudsters at an acceptable level.
Mnuchin, in his speech, also mentioned the Financial Action Task Force (FATF)- an intergovernmental organization devoted to combating money laundering and terrorism financing.
Last month, FATF finalized its recommendations on regulating cryptocurrencies for its 37 member countries. The new guidance recommends enforcing the “travel rule,” a longstanding requirement for international banks when sending each other money on customers’ behalf. The rule requires crypto exchanges and wallet providers to hold know-your-customer information on both sides of each transaction.
Treasury Department offers its assistance to crypto companies
After Steven Mnuchin's speech, Peter Van Valkenburgh Coin Center director of research noted that the Treasury Department has offered its guidance for how crypto custodians can comply with the FinCEN Secrecy Act and how to export those policies abroad through the FATF.
Notable, that the U.S. Treasury Secretary Steven announcement comes before two hearings in which the head of Facebook blockchain division, David Marcus is expected to testify before both Senate and House lawmakers.
Mnuchin mentioned Facebook Libra a number of times during the conference. He also said that they and other governmental agencies have already met with the social media officials.
The U.S. Treasury Secretary outlined, that there should be no problem with launching Facebook Libra, as long as the social media giant is able to maintain strict anti-money- laundering policy.
However, Munich also noted, that he “not comfortable” with Libra launching at this time, the project still requires a lot of work.
What do experts think of potential risks that Facebook Libra holds?
Atoz Markets reached to the author of "Consensusland: A Cryptocurrency Utopia" - Mark Helfman and asked for his opinion on what could really concern the US authorities so much about Facebook Libra. Helfman provided interesting insights on this matter :
“ The reason the authorities are so concerned is the scope of Facebook’s plans. A global company plans to issue its own currency for use by one-third of the world’s population.
It will create a massive financial system around this currency using ATMs, mobile phones, private wallets, and smart contracts—totally separate from any sovereign government."
Mark Helfman also pointed on the fact, that the U.S. Congress has already held three hearings on Facebook, but has not held a hearing on Bitcoin for two years.
Moreover, as the author recalls, the Congress “has never held a hearing about any of the many other U.S.-based businesses that have created their own cryptocurrency—e.g., JP Morgan, Factom, Metal, and plenty of others.”
Helfman added :
“What happens if people trust Facebook more than their own government? When a single company holds more power than the largest, strongest countries in the world? Like the fictional government in my book, Consensusland, governments need to confront a new reality:
Anybody can create money that’s better than theirs
For too long, cryptocurrency came from kids or computer geeks banging out code in their parents’ basements. Or maybe a few smart guys with wacky ideas that would never work in the “real world.” That made it easy for Congress to dismiss it as a fringe technology for criminals, terrorists, and cyber nerds.” With Facebook getting into the game, they can no longer do so. That makes all the difference.On a side note, this discussion is long overdue. I credit Facebook for really pushing this issue to the forefront. So many deep, difficult, interesting political and regulatory questions governments have ignored for way too long.”
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