Facebook Inc. faced its latest Washington crisis Monday: Treasury Secretary Steven T. Mnuchin joined a parade of policymakers and politicians who have bashed its proposed cryptocurrency, demonstrating the hurdles the company must overcome to 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 lawbreakers 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.”
Facebook shares slipped 0.5% on Monday to $203.91. Bitcoin’s value climbed, recovering somewhat from the declines it suffered in the last week.
Mnuchin was far from the first official to express skepticism about Facebook’s effort to create a cryptocurrency, called Libra. Last week President Trump criticized the move, saying on Twitter that he is not a fan of bitcoin and that cryptocurrencies are often used to facilitate “unlawful behavior.” Some of Trump’s staunchest foes in Congress, including Rep. Maxine Waters (D-Los Angeles), have also faulted Facebook, going so far as to demand that the company halt all work on the coin.
Federal Reserve Chairman Jerome H. Powell also told lawmakers last week 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 worthwhile. The fireworks will start again Tuesday when the company faces a hearing before the Senate Banking Committee, followed by a hearing Wednesday before the House Financial Services Committee.
In prepared remarks he plans to present 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 that the token won’t launch until regulatory questions are fully addressed and 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’ prepared remarks said. “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.”
Mnuchin said Monday 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 criticized 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 U.S. 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 has discussed the issue “extensively” with Fed chief 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.
Mnuchin indicated that U.S. approvals of Facebook’s proposed coin may take a while.
Facebook “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 last week 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.