Steven Mnuchin, the US Secretary of Finance, has shared an official statement on how the United States wants to deal with Libra and cryptocurrency. He mainly dealt with regulation and various safety issues.
Like President Donald Trump, he also spoke a few days ago about the speculative nature of cryptocurrency.
Security is crucial
Mnuchin talks about security issues related to bitcoin and other crypto assets. According to him, cryptocurrency can be used for illegal activities and that is (of course) a “problem for national security.”
“As you know, there is a lot of interest in digital assets, including cryptocurrencys such as bitcoin and Libra. There are many questions about regulation and supervision regarding libra, virtual assets and virtual currency. “
“Cryptocurrencies such as bitcoin are used to support billions of dollars in illegal activities such as cyber crime, tax evasion, extortion, ransomware, illegal drugs and human trafficking. Many have tried to use cryptocurrencys to fund their malicious behavior. This is indeed a matter of national security. “
The expectation is that the US government and associated financial institutions, such as FinCEN, will tighten the supervision of the cryptocurrency sector.
What’s the plan?
According to Mnuchin, the Digital Stability Oversight Council Working Group on Digital Assets was established to enable all financial authorities, including the SEC, CFTC and FinCEN, to work together to combat the risks of crypto.
“The United States has played a pioneering role in regulating companies that offer cryptocurrency. We do not allow suppliers of digital assets to work in the shade and do not tolerate the use of cryptocurrencies to support illegal activities. “
“The Ministry of Finance is very clear towards Facebook. But we are also clear to bitcoin users and other providers of digital financial services. They must carry out the same anti-money laundering and counter-financing of terrorism as traditional financial institutions. “
Finally attention from on top
Whether this is positive or negative remains to be seen, but Mnuchin actually says that the American government will make efforts for better regulation within the American cryptomarket. Bitcoin has clearly caught the attention of the government.
“The rules for money service providers apply to physical and electronic transactions. To be clear: FINCEN will keep any entity that carries out transactions in bitcoin, Libra or other cryptocurrency to its highest standards, “added Mnuchin.
As for Libra, Mnuchin stated that the government will allow the development of the digital currency if it meets the standards set by the government.
“We have had several meetings with representatives from Facebook and expressed our concerns. We have also had several meetings with the FSA working group. Discussions are ongoing and they will continue. Facebook still has a lot of work to do to convince us that Libra can handle a correct AML (anti money laundering) correctly. ”
Fact check: how much bitcoin is used for illegal activities?
It is no secret that crypto has made illegal activities possible in the past (and continues to do so). Online market places such as the infamous Silk Road have allowed billions of dollars to be spent on drugs, stolen credit card information and other nasty activities. But it is too short to say that crypto is mainly used by criminals.
Chainalysis, a leading blockchain research agency, has carried out analyzes to follow the flows of bitcoin and other cryptocurrencies to the market places on the dark web. The research shows that the absolute amount (in dollars) has increased over the years. More importantly, the percentage of the total economic network activity has fallen considerably.
In the first half of this year, 515 million dollars in illegal bitcoin payments have already been made. The expectation is that in 2019, 1 billion of illegal activities will be financed with bitcoin.
That is a large amount and may not sound too good. But you have to put this in perspective. That 1 billion is less than one percent of all economic activity occurring on the bitcoin network and pales in comparison to what we see outside crypto.
The United Nations Agency for Drugs and Crime estimates that the amount of money laundered around the world is 2% -5% of global GDP or between $ 800 billion and $ 2 trillion dollars. Most money launderers use the US dollar to launder money.