Facebook Faces Bipartisan Resistance to Cryptocurrency Plans

Date : 07/15/2019 @ 8:02PM
Source : Dow Jones News
Stock : Facebook Inc (FB)
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Facebook Faces Bipartisan Resistance to Cryptocurrency Plans

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By Dave Michaels and Kate Davidson 

WASHINGTON -- Government officials from both parties came out swinging against Facebook Inc.'s plans to launch its own cryptocurrency.

Treasury Secretary Steven Mnuchin on Monday said Facebook Inc. faces a high bar to persuade authorities that it can safely launch the digital money and guard against risks ranging from money laundering to terrorism financing. Rep. Maxine Waters (D., Calif.), the chairwoman of a powerful House committee, separately drafted legislation that would block the social-media company's plans to operate the cryptocurrency, called Libra.

The U.S. developments came as Group of Seven industrialized nations planned this week to discuss risks posed by Libra and other cryptocurrencies during a meeting on Wednesday and Thursday in Chantilly, France, a French official said. Benoît Cœuré, an executive board member of the European Central Bank, is expected to deliver a report on the topic during the meeting, the official added.

Mr. Mnuchin's remarks underscore the political firewall Washington has quickly erected against Facebook's project, unveiled last month as a way to facilitate digital payments around the world. Facebook has said it hopes to make the Libra cryptocurrency available by next year.

"These cryptocurrencies have been dominated by illicit activities and speculation," Mr. Mnuchin said in a press conference. "To the extent that Facebook can do this correctly and can have a payments system correctly with proper [anti-money-laundering safeguards], that's fine. They've got a lot of work to do to convince us to get to that place."

Facebook said Monday that Libra would be regulated by Switzerland's financial watchdog, adding that the digital money would never compete with national currencies or undermine the role of central banks.

Mr. Mnuchin's comments framed the debate over Libra one day ahead of Facebook executive David Marcus's appearance before the Senate Banking Committee. The company's overture to regulators was included in written testimony Mr. Marcus provided to the Senate panel, where he faces the challenge of easing concerns that Facebook -- already embroiled in policy fights over digital advertising and customer data -- is primed to disrupt finance, one of the world's most highly regulated sectors.

President Trump, Federal Reserve Chairman Jerome Powell and other policy makers have already voiced broad misgivings about Facebook's foray into crypto, a space dogged by concerns about money laundering and manipulative trading. Some Democratic members of Congress have called on Facebook to suspend work on Libra until Washington is satisfied with the oversight regime.

"We know we need to take the time to get this right," Mr. Marcus said in written testimony. "Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals."

Libra's primary regulator would be the Swiss Financial Markets Supervisory Authority, Mr. Marcus said, because the group in charge of the project will be based in Geneva. The group includes more than a dozen other companies, including Mastercard Inc. and eBay Inc., indicating that Facebook wouldn't control Libra after it is off the ground.

The cryptocurrency's main purpose is to enable people to use and transfer money around the globe more cheaply than current options allow, Facebook said. The Silicon Valley giant added Libra would be most useful in countries where banking options are scant and the home currency is volatile.

Facebook has said Libra would be a "stablecoin" pegged to a basket of developed-world currencies. The coins will be backed by a reserve of financial assets that include bank deposits and government bonds.

The Libra group "will work with the Federal Reserve and other central banks to make sure Libra doesn't compete with sovereign currencies or interfere with monetary policy," Mr. Marcus said in his testimony.

Libra isn't an investment, Mr. Marcus also said: "People will not buy it to hold like they would a stock or a bond."

If it isn't an investment, it would be free from oversight by the Securities and Exchange Commission. The SEC enforces investor-protection laws that require frequent and detailed public disclosures. The SEC is reviewing whether Libra should fall under its jurisdiction, according to people familiar with the matter.

--Sam Schechner and Bojan Pancevski contributed to this article.

Write to Dave Michaels at dave.michaels@wsj.com and Kate Davidson at kate.davidson@wsj.com


(END) Dow Jones Newswires

July 15, 2019 15:47 ET (19:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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