With Facebook's announcement of its cryptocurrency Libra, cryptocurrency has gotten a lot more attention recently, and not all of it is positive, especially from U.S. lawmakers
In fact, President Donald J. Trump tweeted out his disapproval of Facebook's Libra and Bitcoin alike.
"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. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity," Trump said in a tweet.
U.S. lawmakers have also been heavily suspicious of cryptocurrency, with members of Congress calling for Facebook to halt development on the cryptocurrency until they can examine it closely. And then, two weeks ago, representatives and Senators grilled Facebook executive David Marcus about it.
"They're motivated by one thing: surely their own bottom line," Sen. Sherrod Brown, a Democrat from Ohio, said in a statement. "Allowing Big Tech companies to take over the payment system or position themselves to influence monetary policy would be a huge mistake."
Treasury Secretary Steven Mnuchin also said during a CNBC interview last month that he would make sure, "Bitcoin doesn't become the equivalent of Swiss-numbered bank accounts, which were obviously a risk in the financial system."
From these comments, it seems that many lawmakers view cryptocurrency as being a national security issue, and there are a variety of reasons for this perspective.
"It's no surprise to see certain US officials align with President Trump on the subject of cryptocurrencies. Cryptocurrencies have boxed technology, economic and governance matters all together," Christophe de Courson, CEO of asset management fund Olymp Capital, said in an email. "Thus, Facebook's Libra is seen as a major threat to the US dollar's supremacy and the role the FED plays in the U.S. economy. "
Jose Llisterri, co-founder of cryptocurrency trading platform Interdax, said in an email that a project as large as Libra's could potentially disrupt the U.S. dollar as a global reserve currency, which would certainly qualify as a national security risk.
On the other hand, Courson believes that regulators are mainly worried about the potential for cryptocurrency to be used for illegal activities and are not looking at the bigger picture of crypto's benefits. However, some experts view this complaint as just being a cover for big banks.
"The conflation of cryptocurrency with criminality has become the standard position of big banks because it is their last rhetorical line of defense against a new technology that threatens their stronghold of global financial power," Sky Guo, CEO of blockchain platform Cypherium, said in an email. "Steve Mnuchin, a second-generation career banker and former CIO of Goldman Sachs, has criticized cryptocurrencies in the same week that a shipment owned by his former bank was seized by U.S. Customs authorities for containing over one billion dollars in cocaine. This is far from earnest criticism of our technology."
However, not everyone agrees with this assessment. Lars Seier Christensen, chairman of Concordium, a blockchain network said in an email that is only natural for regulators to take a close eye at the cryptocurrency space.
"Regulators would not be doing their job if they did not try to clarify the risks implicit in the cryptocurrency space. Clearly, there are major flaws in the ability to do appropriate KYC and AML monitoring and this has to be a concern for the authorities," Christensen said.
There is a possibility that an early wave of regulation could kill off early adopters, according to Christensen. However, this wave could help the U.S. government nail down the key differences between cryptocurrencies and blockchain and pave the way for mainstream blockchain acceptance.
"Blockchain is the real deal, while cryptocurrencies are an accessory oiling the wheels of blockchains. When the cryptocurrency becomes the main item — like placing the cart in front of the horse — it falls victim to excessive speculation and sometimes criminal use," Christensen said. "It is essential that we get the message through to politicians that blockchain is a massive growth driver and that with an appropriate design, ID/KYC issues are manageable and in fact, more traceable than in most current business models."