The U.S. Treasury Secretary made 12 sharp statements: cracking down on cryptocurrencies that endanger national security

He likened the encryption issue to a "national security issue" and stressed that the government's "number one priority" is to combat bad actors using encryption for malicious activities.

At a press conference on cryptocurrency on July 15, U.S. Treasury Secretary Steven Mnuchin gave sharp answers to twelve questions, including Facebook's encryption plan, national security, digital currency financial regulation, Venezuela's petro, and G20 digital currency discussions.

At a press conference on cryptocurrencies on July 15, U.S. Treasury Secretary Steven Mnuchin likened the crypto issue to a "national security issue" and emphasized that the government's "number one priority" is to combat bad actors using crypto for malicious activities. Cryptocurrencies such as Bitcoin are speculative and have been used for billions of dollars in illegal activities, which is indeed a national security issue. Treasury agencies will also require cryptocurrencies such as Libra to follow the highest anti-money laundering regulatory standards.

At the press conference, Stephen Mnuchin gave sharp answers to twelve questions including Facebook's encryption plan, national security, digital currency financial regulation, Venezuela's petro, and G20 digital currency discussions.

Liande.com exclusively translated the transcript of Stephen Mnuchin’s speech and Q&A as follows:

Steven Mnuchin: Hello, everyone. Thank you very much for being here. There has been a lot of interest in digital assets lately, including Bitcoin and Libra's cryptocurrency. There are a lot of questions about the regulation and oversight of Libra virtual assets and virtual currencies, but we (the Treasury Department) are primarily concerned about the abuse of virtual currencies by money launderers, financial terrorists, and other bad actors. This week, representatives of Facebook's Calibra project will go to Capitol Hill to discuss issues regarding the cryptocurrency Libra. There has also been a lot of activity recently in the U.S. government and international financial community related to the regulation and handling of digital assets with cryptocurrencies. A lot of people are interested in digital currencies, and this time I will make some brief explanatory comments on what the Treasury Department is doing in this regard, and then I will let you ask questions.

Last month, the Libra Association, formed by 28 companies including Facebook subsidiaries, announced that it was developing a cryptocurrency called Libra. The Treasury Department is concerned that Libra could be abused by money launderers and financial terrorists. Cryptocurrencies like Bitcoin have also been used to support billions of dollars in illegal activities, such as cybercrime, tax evasion, extortion, ransomware, illegal drugs, human trafficking, etc. Many criminals try to use cryptocurrencies to fund their evil deeds.

This is truly a national security issue. The United States has been at the forefront of regulating entities that provide cryptocurrency services, and we will not allow digital asset service providers to operate in the shadows or tolerate the use of cryptocurrency to support illegal activity.

The Treasury Department has made it very clear to Facebook, Bitcoin users, and other digital financial service providers that they must implement the same anti-money laundering and counter-terrorism financing (AML and CFT) regulatory rules as a safeguard for traditional financial institutions. Cryptocurrency remittance transmitters must comply with relevant Bank Secrecy Act (BSA) obligations and register with the Financial Crimes Enforcement Network (FinCEN).

Many people are not familiar with FinCEN, which is a bureau under the U.S. Treasury Department responsible for protecting the financial system from illicit use, combating money laundering, and promoting national security by disseminating financial intelligence. Last year alone, FinCEN collected more than 20 million BSA reports, and more than 300 million reports in the past 11 years. FinCEN regulates under the BSA and has federal regulatory, supervisory, and enforcement authority over money service businesses and banks. The rules governing money service providers apply equally to physical and electronic transactions. As money service businesses, cryptocurrency money transmitters are subject to compliance checks like other U.S. banks. To be clear, the BSA holds any entity that transacts in Bitcoin, Lirbra, or any other cryptocurrency to the highest standards.

Treasury takes very seriously the role of the U.S. dollar as the world's reserve currency, and we will continue to work hard to protect our country and safeguard the U.S. and global financial systems. Because these issues are of high interest, I will answer a few questions:

Question 1 (1): Jay Powell of the Federal Reserve said last week that the U.S. Financial Stability Oversight Council will hold a meeting to discuss Facebook's Libra product. Has the meeting taken place? You mentioned this product launched by Facebook. If Facebook can eventually resolve all your concerns about AML and other issues, do you expect Facebook to engage in the cryptocurrency issuance business?

STEPHEN MUCHIN: Let me take the first question first. We have discussions at the ministerial level, or at the deputy ministerial level. There have been multiple meetings with various regulators, with Facebook representatives, and with the Financial Stability Oversight Council working group. Jay Powell and I meet weekly, and we've discussed this extensively, so those discussions are ongoing.

To the extent that Facebook is doing this correctly and is using proper AML payment systems correctly, that is a good thing, but they have a lot of work to do to convince us otherwise.

Question 1 (2): Facebook has had privacy issues in the past. How does this impact your concerns and how concerned are you about Facebook owning Libra?

Steven Mnuchin: Again, I'm just saying that we have concerns about privacy. There have been questions in the media about potential liquidations, and I'm not going to comment on that, but obviously the regulators and one of the regulators, as I said, most people haven't heard of FinCEN, so one of the reasons I want to explain is whether they're a bank or whether they're a non-bank, they're all subject to the same regulatory environment. So before they can enter the U.S. financial system, they have to convince us and meet a very high standard, or we will hold them accountable.

Question 2: At last week's social media summit, President Trump accused social media of being hostile to conservatives. Can you assure the market and everyone that any actions the administration will take are not because the president believes these social media giants are biased against him?

Steven Mnuchin: Can I repeat that? I will tell you that President Trump does care about Bitcoin and cryptocurrencies, and these are legitimate concerns that we have had for a long time. But I want to emphasize that we are not targeting any one entity, and everybody plays by the same rules. In the same way, whether you walk into a money service provider, or you walk into a bank, or you transact digitally, you have to play by the same rules.

Question 3: Considering that Bitcoin is decentralized, do you have any advice for Americans who are planning to invest in Bitcoin and other cryptocurrencies?

STEPHEN MUCHIN: Well, I would tell them to be careful. First of all, you should be clear about why you are investing in Bitcoin and other cryptocurrencies. There are a lot of good things to invest in, and obviously we know that. But you know the most important issue right now is that we don't want criminals to use cryptocurrencies. That's the number one problem we face, and I think cryptocurrencies have been largely dominated by illegal activities and speculation. We will make sure that the public and investors understand what they are investing in and whether it is the SEC or other regulators, and there is also appropriate disclosure.

Question 4 (1): Are you comfortable with Facebook launching a cryptocurrency if they do it the right way?

STEPHEN MUCHIN: I didn't say I was happy with them launching a currency.

Question 4(2): What if they issue cryptocurrencies in a proper and secure manner?

STEPHEN MUCHIN: But I don't feel comfortable right now. So, we still need to be a little cautious. I mean, there's still a long way to go before we feel it's appropriate and safe.

Question 4 (3): But Facebook already has a timeline for issuing a coin - is Facebook being honest with the government? How many years will it take for them to regain trust?

Steven Mnuchin: I think they've been very forthcoming with the government, and I'm not going to publicly predict how long I think it's going to take Facebook to get to the point where we're comfortable with it, but they have a long way to go. And part of it is also about getting the public interested in cryptocurrency, which is why I want to provide assurances to the public. But before Facebook or anyone else is ready to launch a coin, we're going to make sure that the financial system is protected. And as I said, for those who use cryptocurrency for illicit purposes, we're going to crack down on a lot of the illicit activity.

Question 5: Thank you, Minister. Could you please tell us about the discussions and the discussions with other G20 countries in the specific area of ​​cryptocurrencies?

Steven Mnuchin: We have a lot of consensus on this. As I said, two weeks ago in Orlando, the United States just resigned as the chairman of the Financial Action Task Force on Money Laundering (FATF). I gave the keynote speech there and was adopted. The FATF is the largest regulatory organization in the world, larger than the G20, and sets the gold standard for anti-money laundering (AML). Those rules have also been adopted. In the G7, the G20, we have reached a general agreement that in the United States, if you deal with the U.S. financial system, you must abide by the same rules. This is also something that other members of the G20 are very concerned about.

Question 6: So you said that the Treasury is concerned about bad actors who use cryptocurrencies, and for example, Bitcoin seems to be very popular among white nationalist groups. What steps has the Treasury taken to prevent these bad actors from using these decentralized cryptocurrencies?

Steven Mnuchin: This is not related to any particular group. I will not comment on any particular group, but what I will tell you is that the Financial Crimes Enforcement Network (FinCEN) is conducting multiple investigations, and there have been enforcement actions, and there will be more enforcement actions in the future. We will increase our regulatory and supervisory resources, and this is our absolute focus.

Question 7: Are you seeking some specific agreement at the G7 Finance Ministers' meeting, and are you confident that you will get a statement that is favorable to the United States?

Steven Mnuchin: Again, my understanding is that there is usually a Chair's report, but there is no communique. This is being handled by France, and we have working groups in both the G7 and the G20, and this has been stated in the G20 notification. We are very interested in the taxation of cryptocurrencies, and focusing on international tax issues will certainly be very helpful in our discussions.

Question 8 (1): Back in March, the Treasury Department imposed restrictions and sanctions on Venezuela’s cryptocurrency, the Petro. Our understanding is that the Venezuelan regime is still struggling to keep it afloat. Can you tell us what response you’ve received from these restrictions and if you know anything about the latest developments with the Venezuelan Petro?

STEPHEN MUCHIN: I'm not aware of anybody actually using it at this point, or if it's been canceled, or if it's actually had any success.

Question 8(2): Are restrictions effective?

STEPHEN MUCHIN: Absolutely.

Q9: Weren't you worried about a one-size-fits-all approach to regulation? There is some cryptocurrency regulation that is already handled by the U.S. Commodity Futures Trading Commission (CFTC), and they have been working with the International Monetary Fund and the European Central Bank, and each regulator has done this work within the rules. Not only that, but now Calibra has appeared, so it seems that you want to manage them all in a one-size-fits-all manner?

STEPHEN MUCHIN: No, I don't think we're doing that. In fact, one of the reasons I wanted to talk about this is that there's been a lot of activity going on around cryptocurrency regulation, starting last year. And you know, Libra has gotten a lot of attention, whether it's Congress, the media, or other areas, but people aren't aware of the other work that's going on, so that's why you have this illusion that there's a one-size-fits-all regulatory approach being implemented.

Question 10: I was wondering if you could be more specific about the illegal behavior you just mentioned. Can you give some examples of what Americans should avoid when they enter the cryptocurrency space?

Steven Mnuchin: Again, if you're dealing with legitimate entities in the United States, legitimate entities that are crypto-related do need to comply with KYC and AML rules. If you're looking to use Bitcoin to access these entities and go into dark web transactions and think you won't get caught, you're wrong, you will get caught.

So this is a warning, don't take your chances. Don't use cryptocurrency to engage in illegal activities, because we will put the full efforts of the U.S. Treasury and regulators into action.

Question 11: Will the new regulations benefit traditional banks, perhaps in the same way?

Steven Mnuchin: We intend to create a level playing field, whether you are a currency, a bank, an online operator, or PayPal. This is a level playing field. We have been encouraging financial innovation, and there are many innovations that have also subverted the electronic payment system of traditional banks. Many people are using the US dollar electronic payment system efficiently. You know we will continue to support these activities and hope that technology will continue to develop.

Question 12: Do you think the rise in the value of Bitcoin is caused by fraud? Is there any evidence?

Steven Mnuchin: I'm not going to speculate. I don't know why Bitcoin is trading or where it's trading. I'm not commenting on whether the price of Bitcoin is high or low, I'm talking about the regulatory environment here and warning people against using illegal means.

Editor-in-charge: Tang Jing