On the eve of a congressional hearing into Facebook’s plans to launch its own cryptocurrency, Treasury Secretary Steven Mnuchin said that the U.S. government has significant concerns about digital currencies, including their potential as tools for money launderers.
“This is indeed a national security issue,” Mnuchin said at a press conference Monday. “We will not allow digital asset service providers to operate in the shadows and will not tolerate the use of the cryptocurrencies in the support of illicit activities.”
Mnuchin said that money transmitters of cryptocurrencies must comply with relevant anti-money laundering requirements and register with the Financial Crimes Enforcement Network.
“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, known as AML/CFT, safeguards as traditional financial institutions,” Mnuchin said.
Mnuchin’s comments come after President Trump posted a series of tweets last week, where he criticized cryptocurrencies as “highly volatile and based on thin air” and said they can facilitate unlawful behavior. Trump added that Facebook should apply for a banking charter and “become subject to all Banking Regulations” if it wants to pursue Libra.
Mnuchin said that, while the administration encourages responsible financial innovation, Facebook has to show Treasury that it is ready to launch.
“To the extent that Facebook can do this correctly and can have a payments system, correctly with proper AML, that’s fine,” Mnuchin said. “They’ve got a lot of work to do to convince us to get to that place. … They are going to have to convince us of very high standards before they have access to the U.S. financial system.”
David Marcus, head of Facebook’s Calibra digital wallet, is scheduled to testify on Capitol Hill Tuesday and Wednesday, where he is expected to tell lawmakers that Facebook will not launch Libra until it has satisfied regulators’ concerns.