Facebook has “a lot of work to do” before the Trump administration will let it proceed with its planned cryptocurrency, the US Treasury secretary warned on Monday, a day before the company is due to testify before Congress about the project.
Steven Mnuchin said senior government officials and regulators had met with Facebook executives in recent weeks to discuss their plans for a digital currency, known as Libra.
But Mr Mnuchin said he wanted to see much more detail from the social network on how it intends to prevent its currency being used to launder money and finance terrorism before allowing it to go ahead.
“We’ve had multiple meetings across the regulators with representatives of Facebook and expressed our concerns,” he said at a White House news conference.
“To the extent that Facebook can do this correctly, and can have a payment system correctly with proper AML [anti-money laundering measures], that’s fine,” he added. “But we have got a lot of work to do to convince us to get to that place.”
Mr Mnuchin’s comments reflect a broader bipartisan concern across Washington about the potential consequences if Libra becomes widely used. Democrat Maxine Waters, chair of the financial services committee in the House of Representatives, has called on the company to halt its plans until lawmakers have a chance to examine them more thoroughly.
Officials have said they are worried people will be able to use the currency not only to launder money, but also to finance terrorism and avoid taxes. Central banks are also concerned about the consequences for monetary policy should it prove popular around the world.
Last week, President Donald Trump urged Facebook to apply for a banking licence, warning its virtual currency would “have little standing or dependability”.
On Tuesday, David Marcus, Libra’s co-creator, will get the first of two chances to defend the plan in front of Congress when he answers questions from the Senate banking committee.
In a written statement submitted ahead of that hearing, Mr Marcus insisted Facebook would work closely with regulators before launching the currency, and promised it would not try and compete with central banks.
“The Libra Association, which will manage the reserve, has no intention of competing with any sovereign currencies or entering the monetary policy arena,” Mr Marcus said. “It will work with the Federal Reserve and other central banks to make sure Libra does not compete with sovereign currencies or interfere with monetary policy.”
According to Mr Marcus’ testimony, the Libra Association itself will be regulated by the Swiss Financial Markets Supervisory Authority, with whom it has had “preliminary discussions”. The association will also register with the US Treasury’s Financial Crimes Enforcement Network as a money services business.
The Calibra wallet — a digital service to be operated by a Facebook subsidiary — has filed with US state regulators for money transmitter licences, while the Federal Trade Commission and the Consumer Financial Protection Bureau “will monitor for consumer protection and data privacy and security issues”, Mr Marcus said.
Dante Disparte, the head of policy and communications at Libra, told the Financial Times that Facebook and the other 27 founding members of Libra would finalise their founding rules in the coming months. He added that there had been interest from several other companies to join the association, including “household names from every sector”, which were now being vetted.
Mr Disparte also insisted the project was “incredibly aligned” with the expectations of regulators.
But others warn that this week’s hearings in Washington are likely to be tense. “I think David Marcus is going to be the piñata at these things,” said one person involved in Libra’s regulatory efforts.
The person said they expected the hearings to focus on data privacy, but also anti-money laundering rules, adding that there was a trade-off between the two.
“On the one hand, [politicians] want AML compliance . . . But they don’t want [Facebook] to collect any information on users. It doesn’t take a genius to realise the inherent conflict there,” the person said.