Facebook’s plan to launch its Libra cryptocurrency is facing considerable pushback from federal officials who’ve raised concerns about the prospect of it being used to skirt anti-money laundering rules and fund other illicit activities.
House Democrats on the House Financial Services Committee have already circulated draft legislation aimed at barring U.S. tech companies with annual revenue of $25 billion from issuing digital currencies and fining those that do so up to $1 million per day. The bill, which would effectively prohibit Facebook from behaving like a financial institution, is titled “Keep Big Tech Out of Finance Act.”
As numerous outlets have reported, the draft legislation reads, in part: “A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System.”
The Democrats are not alone in their opposition to Facebook’s plans. Last week, President Trump signaled that he, too, was not a fan, tweeting that Libra will have “little standing or dependability.” “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air,” he said.
....Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National...— Donald J. Trump (@realDonaldTrump) July 12, 2019
At a Monday press conference, Trump’s treasury secretary, Steven Mnuchin, framed the issue as a matter of national security and said he is “not comfortable” with Facebook’s plan today. The secretary went on to say that his department has raised “very serious concerns” that Libra may be used to enable the crimes of money launderers and terrorist financiers.
“Cryptocurrencies such as Bitcoin have been exploited to support billions of dollars of illicit activity, like cybercrime, tax evasion, extortion, ransomware, illicit drugs, and human trafficking,” Mnuchin said. “Many players have attempted to use cryptocurrencies to fund their malign behavior.”
David Marcus, Facebook’s top official overseeing the Libra project is set to testify before the Senate Banking Committee on Tuesday and before the House Financial Services Committee on Wednesday.
In his prepared remarks, which Facebook released on Monday, Marcus stated that Libra—and Facebook’s digital wallet, known as Calibra—will be in full compliance with the regulations set forth by Treasury’s Financial Crimes Enforcement Network. (FinCEN) and will comport with the Bank Secrecy Act and other federal laws.
“The status quo is not working for many; it is too expensive for people around the world to use and transfer their money,” he said. “We believe Libra can offer a more efficient, low-cost, and secure alternative.” He also says he expects Libra to be regulated by the Swiss Federal Data Protection and Information Commissioner.
Libra is managed by a nonprofit based in Geneva with 28 founding members companies, of which Facebook is merely one. Others include Ebay, Uber, Lyft, Visa, Paypal, and Mastercard. But according to the New York Times, even Facebook’s high profile partners have their doubts about Libra’s viability and many of them are as curious as we are about how it’s all going to pan out.