FinCEN wallet rule
Bitcoin,  Libra,  United States

Mnuchin doubles down on President Trump’s Bitcoin, Facebook bashing

Treasury Secretary said potential for abuse of Libra cryptocurrency is a national security issue

Treasury Secretary Steven Mnuchin called cryptocurrencies a “national security issue” that threatens to enable drug dealers, human traffickers, and terrorists during a press conference Monday.

Following up on the President’s Tweets last week that took aim at both bitcoin and Facebook’s new Libra cryptocurrency project, Mnuchin agreed with Donald Trump’s assessment that virtual currencies are “are highly volatile and based on thin air.”

Acknowledging that Facebook’s Libra has put the issue of cryptocurrencies’ potential for abuse and its place in the global financial system in the spotlight, Munchin said they “have been exploited to support billions of dollars of illicit activity, like cybercrime, tax evasion, extortion, ransomware, illicit drugs, human trafficking.” 

Insisting that cryptocurrency “is indeed a national security issue,” Mnuchin said “there’s a lot of illicit activity that we’ll be shutting down for people who are using cryptocurrencies for bad purposes.”

To that end, Mnuchin noted that the administration has been working with a number of international bodies, including the G7, G20, and the Financial Action Task Force (FATF). The later body recently mandated “comprehensive measures” designed to harmonize “how countries must regulate and supervise activities and providers in this space.”

As for Libra, Mnuchin said that while it could in theory be a safe and appropriate addition to the financial services sector, “I’m not comfortable today. They and others have a lot of work to do before they get us comfortable. There’s been a lot of public interest in this and that’s why I wanted to give the public the assurance that…we’re going to make sure the financial system is protected.”

To that end, the Secretary said, the Financial Stability Oversight Council recently established a regulatory Working Group on Digital Assets including the Financial Crimes Enforcement Network (FinCEN), the Federal Reserve, the Consumer Financial Protection Bureau (CFPB), the Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission (CFTC), among others.

Yet he made clear that the Trump White House is not against responsible financial innovation, “including new technologies that may improve the efficiency of the financial system and expand access to financial services.”

The administration has seen a lot of very effective financial innovation moving dollar-based electronic payment systems away from traditional banks, Mnuchin said. “This is intended to be a level playing field,” he added. “We’ll continue to support those activities.”

Asked about legitimate cryptocurrency service providers, said Mnuchin the administration , Congress, and regulatory and enforcement agencies had been doing a lot of work with “legitimate entities” in the cryptocurrency field that fall under the U.S. banking and financial system’s know your customer (KYC), anti-money laundering (AML), and countering finance of terrorism (CFT) rules. 

“Treasury has been very clear to Facebook, bitcoin users, and other providers of digital financial services that they must implement the same…safeguards as traditional financial institutions,” said Mnuchin. “Money transmitters of cryptocurrency must comply with their relevant Bank Secrecy Act (BSA) obligations.”

Speaking to cryptocurrency users, Mnuchin added, “If you want to use it for speculation, that’s one thing.” 

He warned, “if you’re looking to use bitcoin to [bypass those rules] and go on the dark web and think you’re not going to get caught, you’re going to get caught. We’re going to put the full effort of the U.S. Treasury and the regulators on to that.”

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.