Bitcoin and cryptocurrencies have been thrown into the limelight over recent months by social media giant Facebook’s plans to launch its own private cryptocurrency next year, with much of the attention negative.
U.S. president Donald Trump sent shockwaves through the bitcoin and cryptocurrency community last week when he branded bitcoin “based on thin air,” with his comments coming just after the chair of the U.S. Federal Reserve said closer regulation of cryptocurrencies was needed.
Now, U.S. Treasury secretary Steven Mnuchin has added his voice to the assault on bitcoin, Facebook’s planned Libra crypto project, and other cryptocurrencies, warning they pose a “national security” risk to the country.
“This is indeed a national security issue,” Mnuchin told reporters at a press conference yesterday. “Cryptocurrencies such as bitcoin have been exploited to support billions of dollars of illicit activity like cyber crime, tax evasion, extortion, ransomware, illicit drugs, and human trafficking,” adding that Facebook’s Libra “could be misused by money launderers and terrorist financiers.”
Echoing Fed chair Jerome Powell, Mnuchin said he is “not comfortable” with Facebook’s plans for its private cryptocurrency, Libra.
Facebook, which has been struggling to pivot to a more privacy-based business model in light of its ongoing data-sharing scandal, revealed plans for a global cryptocurrency last month and has recruited 28 partners, including the likes of Uber, PayPal and Mastercard to help govern the bitcoin rival, expected to be primarily aimed at serving developing countries when it launches.
Last week, Trump tweeted that he’s “not a fan of bitcoin and other cryptocurrencies … Unregulated crypto-assets can facilitate unlawful behavior, including drug trade and other illegal activity,” though many in the bitcoin and cryptocurrency industry have taken the U.S. president’s interest in, and awareness of, bitcoin as a positive for the burgeoning technology.
“The president does have concerns as it relates to bitcoin and cryptocurrencies—those are legitimate concerns that we have been working on for a long period of time,” Mnuchin said, suggesting Trump’s comments were not off the cuff.
The latest comments from the Trump administration on bitcoin and cryptocurrencies have been taken by some as “bullish news for the future of cryptocurrencies.”
“Steve Mnuchin’s press conference [was] actually bullish news for the future of cryptocurrencies long term,” said Tom Robinson, chief scientist at blockchain forensics company Elliptic. “The U.S. has had a clear anti-money laundering regulatory framework around cryptocurrencies for several years now, while the rest of the world, led by the Financial Action Task Force (FATF), is rapidly adopting anti-money laundering regulation focused on maintaining oversight of cryptocurrency service providers.”
“Libra by design, is open in order to achieve its goal of serving the world’s unbanked,” added Robinson. “As such two design choices have been made with Libra that will greatly reduce the risk of misuse by bad actors. Firstly, like bitcoin or ethereum, Libra is based on a transparent transaction ledger. Secondly, Libra transactions will be processed by ‘validators’, which are businesses such as Mastercard and Uber. Libra transactions will only be processed if a majority of the validators agree to do so.”
Facebook has responded to criticism of its Libra plans by governments around the world, including that of India and France, by indicating its desire to work with “regulators, central banks, and lawmakers” to address and, hopefully, overcome their concerns.