United States Department of Treasury Secretary Steven Mnuchin, in a Monday press conference, attacked cryptocurrencies, including Facebook’s planned Libra. Mnuchin charged that Libra and other cryptocurrencies “could be misused by money launderers and terrorist financiers” and are a “national security issue.” Further stated Mnuchin: “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.”
Mnuchin, however, likely has no real reason for such concerns about Libra. It looks like backers of Libra are prepared to help the US government crack down on cryptocurrencies and financial privacy.
The argument Mnuchin presented Monday is the same argument routinely used in the US government’s war on cash. The ability of cash to be transferred privately is argued to be a great danger because the private transfers can advance nefarious purposes. To prevent this, cash transactions must be spied on, very much curtailed, or event banned; it’s a matter of public safety. So goes the argument for eliminating privacy from everyone’s financial transactions.
Mnuchin’s comments followed similar expressions of concern related to Libra and cryptocurrencies generally last week by Federal Reserve Board Chairman Jerome H. Powell in congressional testimony and President Donald Trump at Twitter.
But don’t be fooled into thinking Facebook is introducing Libra as a means to protect privacy from government’s prying eyes. Instead, the written testimony of David Marcus, the head of Facebook subsidiary Calibra, for a Tuesday hearing of the United States Senate Banking, Housing, and Urban Affairs Committee indicates that Marcus wants the roll-out of Libra to be an intensely cooperative venture with the US government. Thus, it looks like the introduction of Libra is shaping up to be the means by which a major crackdown on all cryptocurrencies can commence. Marcus declares:
Chairman Powell has made clear that the process for reviewing Libra needs to be patient and thorough, rather than a sprint to implementation. We strongly agree. That was the spirit with which we published the white paper introducing the Libra project. The time between now and launch is designed to be an open process and subject to regulatory oversight and review. In fact, I expect that this will be the broadest, most extensive, and most careful pre-launch oversight by regulators and central banks in FinTech’s history. 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.
Of course, the expansive regulations worked out for Libra should be expected to be applied to other cryptocurrencies as well. It’s only fair, right?
Singing from the same songbook as Mnuchin about preventing dangers that can arise from the use of cryptocurrencies and even explicitly marketing Libra as a participant in the war on cash, Marcus further states:
The Libra Association is similarly committed to supporting efforts by regulators, central banks, and lawmakers to ensure that Libra contributes to the fight against money laundering, terrorism financing, and more. A network that helps move more paper cash transactions—where many illicit activities happen—to a digital network that features regulated on- and off-ramps with proper know-your-customer (KYC) practices, combined with the ability for law enforcement and regulators to conduct their own analysis of on-chain activity, will present an opportunity to increase the efficacy of financial crimes monitoring and enforcement. The Libra Association will continue to engage proactively and openly with all relevant stakeholders on these key issues. Libra should improve detection and enforcement, not set them back.
So much for cryptocurrencies providing privacy from government’s prying eyes. The people behind Libra appear happy to work with the government to ensure there is no such benefit for people using Libra or, ultimately, any cryptocurrency.
Reprinted with permission from the Ron Paul Institute for Peace and Prosperity.