With reference to the recent news hearings, the US government is highly concerned with regard to cryptocurrencies, including Facebook-backed Libra as they are viewing them as a national security issue. In a press conference last week, US Treasury Secretary Steven Mnuchin accepted that the US Treasury Department has some very serious security issues with the misuse of Libra by terrorists, smugglers and money launderers. The statement was not surprising for us; however, it has clearly stance over their point of view.
Background
In June 2019, Facebook announced its first cryptocurrency launch named “Libra” that will be run by a Switzerland-based nonprofit Libra Association in 2020. The digital asset was clearly made not to be controlled by Facebook itself that was mentioned in their white paper. It was claimed to be run by giant stakeholders, including Visa, PayPal, MasterCard, Uber, Spotify, and Stripe. Facebook has thought of keeping it as a profitable subsidiary. Calibra is making the digital wallet for exchange and storage of cryptocurrency – Libra.
After the publication of the above details on a white paper, Federal Reserve Chairman Jerome Powell showed that the US government has grave concerns for money laundering and consumer protection and make the team with the central bank to verify it. Other officials in Washington were also called for more clarity surrounding the project.
Most of the congress members of both the holding parties raised questions on the motives behind the launch. They also asked the stakeholders to delay the launch as an unchecked expansion to extend the reach into user’s lives.
Reasons
Undoubtedly we can get why the U.S. officials are so much resistant with the launch of a new digital threat to their national security. Following the state concerns, a press conference was called after President Donald Trump issued a statement on the tweet that he is not a fan of cryptocurrencies and suggested Facebook management to launch Libra next year. After that, bitcoin rates dropped sharply following his criticism. It was a record that world’s most valuable and topmost digital currency fell off to $9,872 that was the lowest opening of 10% of that week that make investors like Premium Jackets under reluctance for cryptocurrencies.
Previously, bitcoin and other Cryptocurrencies of billions of dollars have been misused for outlawed crimes such as ransomware, tax evasion, illicit drugs cyber-crime, extortion, and human trafficking. Hence, the U.S. government is not comfortable with the Facebook launch. U.S. Treasury Secretary Steven Mnuchin ended the statement saying, “they have a lot of work to do for this.”
Mnuchin further added:
“The U.S. welcomes responsible innovation, including new technologies that may improve the efficiency of the financial system and expand access to financial services. However, 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”.
Storyline
Following the major downfall of cryptocurrency in the U.S market and with respect to the whole criticism and reluctance from the U.S. official, Facebook told news channels that:
“we have anticipated critical feedback from regulators, central banks, lawmakers around the world so that we could have those conversations.”
They further said that they had announced the launch of Facebook cryptocurrency Libra a year before its expected launch date.
After that, the head of Facebook’s digital wallet, Mr. David Marcus has been instructed to schedule and testify before the committee. He has already addressed the concerns raised by the U.S. Senate Banking Committee in a letter last week. Also, The House Financial Services Committee is holding his Libra focused hearing. Marcus concluded that “Facebook needs governments, central banks and regulators involved to launch the digital asset properly and we can’t do this alone.”
Following the statement, Mnuchin was assured being transparent with all cryptocurrency users that every U.S. citizen is bound to implement the same counter-terrorism and anti-money-laundering safeguards as other financial institutions.
“With respect to Facebook’s Libra and other developments in cryptocurrencies, our overriding goal is to maintain the integrity of our financial system and protect it from abuse,” he said. “We will not allow digital asset service providers to operate in the shadows.”
Way forward
Finance experts at King Essay believe that Facebook was prepared behind the curtains for this surprise as it was evidently and likely ready to meet the standards and now navigating pushback from U.S. Treasury Department and the President as well. Both of them are concerned because they view cryptocurrency as a highly volatile asset.
Facebook was then testified at Senate and agreed to postpone the launch of Libra till all of the regulatory issues and concerns are addressed. Hence, Facebook is holding on to its launch processes, and the U.S. government official is making way out to get the cryptocurrencies to the safest extend to make it away from the global perspectives.
