The US Treasury Secretary Steven Mnuchin has sounded caution on Facebook’s Libra project. This comes in the wake of President Trump tweeting out his displeasure with Bitcoin and cryptocurrencies overall. Similarly, Secretary Mnuchin held a unique press conference on the administration’s stance on crypto in general.
Facebook’s Libra project has obviously been one of the most startling tech developments in tech this year. The possibility of the tech giant delving into crypto is an exciting yet intriguing prospect. This is because the gigantic company can offer institutional legitimacy and immense marketing power.
Mnuchin made the comments ahead of two hearings on Capitol Hill where Facebook blockchain lead David Marcus will testify before Senate and House lawmakers.
President Trump Views
Donald Trump put out a trove of tweets in the past weeks lambasting crypto. He stated that cryptocurrencies like Bitcoin facilitate “unlawful” activities like drug trafficking. On Libra, his response was more muted with the President stating that Facebook will probably need a banking charter to conduct business with Libra.
President Trump is obviously a critic of Facebook CEO for supposed censorship. Many waited for the treasury chief to clarify the actual administration’s position on the same.
Mnuchin reiterated Trump’s statements on the use of crypto for illegal activities:
“Libra could be misused by money launderers and terrorist financiers. This is indeed a national security issue, The Financial Crimes Enforcement Network (FinCEN) will be examining Libra and bitcoin, and will hold any entity that transacts with either to the highest standards”
These comments mean that the administration will use its regulatory leash sternly going forward. The concern over the misuse of crypto is certainly something lawmakers will grill Facebook on during the hearings.
FATF has published guidelines for member countries in recent weeks on regulation for crypto. The scope of the guidelines is essentially to mandate KYC from coin exchanges and service provides. The governments see this kind of customer information as essential in fighting the said crimes. The US is obviously a key player in FATF and the guidelines are probably an extension of Trump’s administration’s policies overall.
Impact of Regulations Moving Forward
Given the policy reach of FATF, these measures will certainly be felt through most of the developed world. On Libra, in particular, Mnuchin stated that the company has its work cut out before it can satisfy regulators on compliance. He contends that the coin does not satisfy treasury standards and he is, therefore, “not comfortable” with Libra launching at this time.
Facebook can certainly propel to coin to global adoption due to the billions of WhatsApp users. Accordingly, the coin has the potential to fundamentally transform how finance works.
With regard to other cryptocurrencies, the impact of the measures can be devastating. This is because coins that conduct ICOs in particular stand to be subject of regulatory crackdown. Exchanges will also have to enforce identity requirements. This will certainly limit the use of anonymous crypto which to some was the whole point of decentralization.
Mnuchin did not give his opinion on how Bitcoin prices will trend in the future. That said, there was a 4 percent jump in Bitcoin prices in the immediate aftermath of these statements. The disclosure requirements will be a significant part of the crypto landscape moving forward. It will be interesting to note how Libra and other coins cope.