Mnuchin voices 'serious concerns' about Facebook cryptocurrency project

Mnuchin voices 'serious concerns' about Facebook cryptocurrency project
© Aaron Schwartz

Treasury Secretary Steven MnuchinSteven Terner MnuchinThe Hill's Morning Report - Tempers boil over at the White House Schumer seeks focus on health care amid impeachment fever The Hill's Morning Report - Trump grapples with Turkey controversy MORE on Monday said the U.S. has "very serious concerns" about Facebook's plans to launch a new cryptocurrency, adding multiple agencies are worried the new currency could be used to finance terrorism or aid money-laundering schemes.

"The Treasury Department has expressed very serious concerns that [Facebook cryptocurrency] Libra could be misused by money launderers and terrorist financiers," Mnuchin said during a press conference on cryptocurrency.

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"We will not allow digital asset service providers to operate in the shadows and will not tolerate the use of the cryptocurrencies in support of illicit activities," he warned.

The briefing served largely as a warning to Facebook and the other companies that will be involved in the Libra Association, the nonprofit that will be in charge of operating Facebook's Libra cryptocurrency.

Mnuchin said U.S. regulatory bodies have engaged in multiple meetings with Facebook representatives to discuss Libra.

He said Facebook has "a long way to go" to convince regulators that it is prepared to launch the controversial project.

The head of Facebook's cryptocurrency project earlier on Monday pledged that Libra would not launch until all regulatory concerns are "cleared up." David Marcus, who leads Facebook's new subsidiary Calibra, is set to testify this week before the House and Senate about the project, which has received skepticism and scorn from Capitol Hill.

Mnuchin during the conference also noted that he "obviously" has concerns about Facebook's history with privacy violations. 

He said the government will insist that Libra register with the Treasury Department's Financial Crimes Enforcement Network, which collects information on financial transactions in order to identify instances of terrorist financing, money laundering or other illicit financial activity.

Marcus, in his written testimony for the Senate Banking Committee, pledged that the Libra Association would register with the Treasury Department bureau as a money services business.

Mnuchin during the briefing slammed other online currency systems, like bitcoin, for allowing their service to be "exploited to support billions of dollars of illicit activity like cybercrime, tax evasion, extortion, ransomware, illicit drugs, human trafficking." 

"Treasury has been very clear to Facebook, bitcoin users and other providers of digital financial services, that they must implement the same anti-money laundering and countering financing of terrorism ...  as traditional financial institutions," Mnuchin said.

Libra would allow users to send and receive money by exchanging a proprietary cryptocurrency backed by dozens of major corporations, including Facebook, Uber and Mastercard.

While Libra will be controlled by a Swiss nonprofit separate from Facebook, the company will operate a virtual wallet called Calibra that is operated by a Facebook subsidiary. The Calibra wallet will be one of multiple digital wallets that will be on the Libra blockchain.

The announcement of the Libra project last month has incurred swift backlash from Capitol Hill and regulators, including Federal Reserve Chairman Jerome Powell, who last week urged against a "sprint toward implementation."