Facebook declared on Monday it would not progress with the launch of its Libra cryptocurrency until regulatory concerns are discussed, as the US Treasury secretary took the unprecedented step on of saying he had serious concerns it could be used for illicit activity.
David Marcus, who oversees Facebook’s blockchain efforts, planned to tell Congress that Libra is not being built to compete with traditional currencies or interfere with monetary policy.
“The Libra Association, which will manage the [Libra] Reserve, has no intention of competing with any sovereign currencies or entering the monetary policy arena,” Mr Marcus was due to say on Tuesday, according to prepared testimony released by the Senate Banking Committee. “Monetary policy is properly the province of central banks.”
“Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals,” he said.
Speaking with reporters, Treasury secretary Steve Mnuchin said he was not comfortable with Libra currently, particularly in guarding against money laundering and other illicit use.
“They’re going to have to convince us of very high standards before they have access to the US financial system,” he said.
Mr Mnuchin is the latest senior US regulator to air concerns with the product, days after Federal Reserve chairman Jay Powell expressed similar worries that the digital currency could be misused.
“These cryptocurrencies have been dominated by illicit activity and speculation,” said Mr Mnuchin.
In his prepared testimony, Mr Marcus said the Libra Association, the companies behind the Facebook-led cryptocurrency, planned to register as a money services business with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and fully expected to comply with anti-money laundering and Bank Secrecy Act rules.
Since announcing the Libra project last month, Facebook has faced a torrent of criticism and scepticism from policymakers across the world who cite concerns over data security, money laundering and consumer protections.
Mr Marcus was scheduled to testify on Tuesday and Wednesday before congressional committees overseeing financial issues and several members have suggested the product be barred.
Addressing some of those concerns, Mr Marcus said in his prepared testimony that partners providing financial services with Libra will be required to comply with anti-money laundering rules. The Libra Association will not hold personal data of users beyond basic transaction information, and personal information provided to Calibra, the digital wallet Facebook is developing to hold Libra, will not be shared with the social media company and cannot be used for targeting ads.
Mr Marcus added that he expected the Swiss Federal Data Protection and Information commissioner to be Libra’s privacy regulator because the Libra Association is headquartered in Geneva. The association is also in preliminary talks with the Swiss Financial Markets Supervisory Authority on “an appropriate regulatory framework”.
While promising Libra will adhere to relevant laws and regulations, Mr Marcus aimed to sell policymakers on the product’s merits as well, arguing the United States should not stifle such innovation.
“I am proud that Facebook has initiated this effort here in the United States,” his testimony said.
“I believe that if America does not lead innovation in the digital currency and payments area, others will. If we fail to act, we could soon see a digital currency controlled by others whose values are dramatically different.”