Treasury Secretary Steven Mnuchin on Monday said the Trump administration, fearing the misuse of shadowy banking channels, will force Facebook or other providers of cryptocurrency to behave like traditional financial institutions if they move forward with their plans.
Mr. Mnuchin said that includes registering with the Financial Crimes Enforcement Network, a Treasury Department bureau that analyzes financial transactions for use in money laundering or the financing of terrorism.
“The Treasury Department has expressed very serious concerns that Libra could be misused by money launderers and terrorist financiers,” Mr. Mnuchin said. “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.”
“This is a warning,” he added. “If you want to use it for illicit activities, we’re going to put the full effort of the U.S. Treasury and regulators onto [preventing] that.”
David Marcus, head of Facebook subsidiary Calibra, will testify about its plans before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.
“We know we need to take the time to get this right. And I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals,” Mr. Marcus says in prepared testimony to the Senate panel.
He also will defend the idea’s merits, saying it is a low-cost way for people to move money around the world.
“We believe that Libra can make real progress toward building a more inclusive financial infrastructure,” he plans to testify. “The journey to get there will be a long one, and we recognize that ours has just begun.”
President Trump has criticized bitcoin and other cryptocurrencies, however, saying they are “not money” and “based on thin air.”
Mr. Mnuchin said the administration is laying the groundwork for enforcing guardrails around cryptocurrency with foreign partners. Officials discussed it at the Group of 20 summit in Japan, and the secretary will follow up at the Group of 7 finance ministers’ meeting in France.
“There’s enormous agreement on this,” Mr. Mnuchin said.
The Federal Reserve is watching, too.
Chairman Jerome H. Powell recently told lawmakers that Facebook’s plan to create Libra cannot move forward unless it addresses concerns over privacy, money laundering, terrorist financing and other questions.
Mr. Trump appeared to pour cold water on Facebook’s plans in a tweet last week, saying the social media platform would need to seek a banking charter.
“Facebook Libra’s ‘virtual currency’ will have little standing or dependability,” Mr. Trump tweeted. “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.”
On Monday, Mr. Mnunchin said the effort is not an attempt at political retribution.
“We’re not going to target any one entity,” Mr. Mnuchin said.
• Dave Boyer contributed to this story.
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