Facebook Libra Crypto Launch Worries U.S. Treasury Secretary Mnuchin

Libra logo illustration
Small toy figures are seen on representations of virtual currency in front of the Libra logo in this illustration picture, June 21, 2019. (Photo: REUTERS/Dado Ruvic/Illustration)

United States Treasury Secretary Steven Mnuchin, in a press conference held Tuesday, talked about Facebook's much-hyped Libra and cryptocurrency regulation and how the entry of new crypto in the global market worries him.

"There are these discussions going on - and it will continue to go on - and again, to the extent that Facebook (NASDAQ: FB) can do this correctly and can have a payment system, with proper AML (Anti-Money Laundering) system in place, that's fine. They (Facebook) have a lot to do to convince us to get to that place."

Back to $11,000, for now

Mnuchin's comments came in a wild month for bitcoin (BTC) which saw a huge rally that began when Facebook announced it will unveil its own crypto. With this development, the crypto universe seemed undeterred bitcoin jumping after Mnuchin's comments. The world's most popular virtual money is now almost back to $11,000 as of Tuesday morning.

So, what does all this mean? According to CNBC's Brian Kelly, facebook joining the fray will be interesting. In general, Kelly has a couple of takeaways, foremost of which is he wants "bad actors out of this new asset class so Libra can flourish the way that it should," and that crypto investors, in the midst of ongoing investigations as outlined by Mnuchin, should expect more negative headlines, that might actually "add a little bit of turbulence to bitcoin price."

Concern about disruption

Going back to Libra's kind of payment system, experts think it is really unlikely the new crypto is going to launch anytime soon. As Mnuchin has emphasized, "if they have a lot of work to do, they are willing to do it and good for Facebook, they have the resources to do it.

However, the main pulse of the finance market is that rolling out Libra into the mainstream virtual market will take some time to materialize. Kelly said there will be a big concern about big tech disrupting finance rather than the technology itself.

While the U.S. Congress is currently tackling a bill that will set in place the implementing rules and regulations that will cover not only new digital entities like Libra, many are skeptical it will go very far.

Keeping it out of the picture

At the moment, it all looks like that Congress is just talking about keeping big-name tech firms out of finance, and that's it. "So, that is the sentiment out there against facebook and that is the headwinds they are facing," Kelly said.

Mnuchin's comments come before David Marcus, head of Calibra - which is the Libra effort at Facebook - goes to the Capitol Hill to present his case this week.

Meanwhile, as the social media giant disclosed on Monday that it would not proceed with the unveiling of its own crypto until regulatory issues are ironed out - and as the U.S. Treasury secretary aired his concerns Libra could be used for illicit online trade, a recent survey conducted by financial services firm Jefferies of 600 social media users on Libra showed that 80 percent do not plan to use facebook's cryptocurrency.

© 2019 Business Times All rights reserved. Do not reproduce without permission.
Sign Up for Newsletters and Alerts