Echoing the statement released by U.S. President Donald Trump a few days ago, Mnuchin reaffirmed the speculative nature of crypto assets.
Mnuchin cited serious security issues regarding bitcoin and other crypto assets, stating that the use of cryptocurrency to support illicit activity is a “national security issue.”
“Recently, as you know, there has been a great deal of interest about digital assets including cryptocurrencies such as bitcoin and Libra. There are many regulatory and supervisory questions regarding libra, virtual assets, and virtual currencies.”
“Cryptocurrencies such as bitcoin have been exploited to support billions of dollars of illicit activity like cybercrime, tax evasion, exortion, ransomware, illicit drugs, and human trafficking. Many players have attempted to use cryptocurrencies to fund their malignent behavior. This is indeed a national security issue.”
In the near term, the U.S. government and its financial agencies such as FinCEN are expected to tighten their oversight on the cryptocurrency sector.
What will change about crypto?
According to Mnuchin, the Financial Stability Oversight Council’s Working Group on Digital Assets has been established to enable all financial authorities including the SEC, CFTC, and FinCEN to work together to combat risks posed by crypto.
“The United States has been at the forefront of regulating entities that provide cryptocurrency. We will not allow digital asset service providers to operate in the shadows and will not tolerate the use of the cryptocurrencies in support of illicit activities.”
“Treasury has been very clear to Facebook, to bitcoin users and other providers of digital financial services that they must implement the same anti-money laundering and countering financing of terrorism, known AMLCFT safeguards as traditional financial institutions.”
Mnuchin cautioned that crypto entities will be subject to the same level of regulation, oversight, and expectations as traditional financial institutions, indicating that the government will increase its efforts to regulate the space.
“The rules governing money service providers apply to physical and electronic transactions alike. As money service businesses, cryptocurrency money transmitters are subject to compliance examinations, just like every other U.S. bank. To be clear, FINCEN will hold any entity that transacts in bitcoin, Libra, or any other cryptocurrency to its highest standards,” Mnuchin added.
As for Libra, Mnuchin stated that the government will allow the development of the asset if it meets the standards set forth by the government.
“We’ve had multiple meetings across the regulators with representatives of Facebook and expressed our concerns. We’ve also had multiple meetings of the FSA working group. There are these discussions going on and they will continue to go on. To the extent that Facebook can do this correctly and can have a payment system with proper AML, that’s fine, but they have a lot of work to do to convince us.”
Bitcoin industry executives remain optimistic
The Chairman of the Fed and the Treasury Security both agree that Bitcoin is a speculative store of value.
Both of them, along with the President, agree that Libra and Bitcoin are two very different things.
— Travis Kling (@Travis_Kling) July 15, 2019
The crypto industry responded positively to Mnuchin’s press conference.
Barry Silbert, the CEO of Digital Currency Group, one of the largest venture capital firms in the crypto space, said that the briefing on crypto is “complete and total validation of bitcoin.”
“Never imagined I’d be watching the Treasury Secretary of the United States hold a press briefing from the White House re bitcoin and cryptocurrencies so soon,” he said.