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Roubini: BitMEX in Violation of Securities Laws, Crypto a Metastasized Cancer

Nouriel Roubini derided BitMEX as an example of a criminally unregulated crypto exchange, and called for authorities to enforce crypto regulation at large.

Economist and anti-cryptocurrency pundit Nouriel Roubini has recently declared that there is “overwhelming evidence of rampant fraud and abuse” in the crypto space. 

Roubini, a professor at NYU’s Stern School of Business, also took aim specifically at the compliance policies of crypto exchange BitMEX in an essay entitled “The Great Crypto Heist.” The essay was published by opinions publication site Project Syndicate on July 16.

According to Roubini, anonymous sources from within BitMex told him that criminals perform a massive amount of money laundering on the exchange:

“BitMEX insiders revealed to me that this exchange is also used daily for money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere; the exchange does nothing to stop this, as it profits from these transactions.”

Roubini also criticized the exchange’s anti-money laundering (AML) and know your customer (KYC) regulations at large, going so far as to say that the exchange is in violation of securities laws. Roubini writes:

“At any rate, we do know that BitMEX skirts AML/KYC regulations. Though it claims not to serve U.S. and U.K. investors who are subject to such laws, its method of “verifying” their citizenship is to check their IP address, which can easily be masked with a standard VPN application. This lack of due diligence constitutes a brazen violation of securities laws and regulations.”

Roubini recently debated BitMEX CEO and co-founder Arthur Hayes, as he recalls. Following the debate, he wrote a Twitter post calling Hayes a coward and telling him to release the tape. According to Roubini’s recent article, Hayes has subsequently released the video.

Roubini has also called on authorities to intervene and enforce regulation. He gave a nod to U.S. Treasury Secretary Steven Mnuchin, who recently said that “… to a large extent, these cryptocurrencies have been dominated by illicit activities and speculation.” 

Roubini mentioned several studies to support his claim that there exists “overwhelming evidence of rampant fraud and abuse.”  He said there is one study which concludes that up to 95% of Bitcoin transactions are fake, which he says suggests “that fraud is not the exception but the rule.” Another study he refers to reportedly concluded that 80% of initial coin offerings (ICOs) in 2017 were scams.

As previously reported by Cointelegraph, ICO advisory firm Statis Group ran a study that looked at data on ICOs in 2017. According to the study, 80% of the ICOs in 2017 were indeed scams. However, out of a total $11.9 billion raised via ICOs, only $1.31 billion — approximately 11% — of those funds actually went to scam projects.

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Libra Is Like Sending a Friend Request to Terrorists, Politician Says

In a fiery tweet, US Congressman Brad Sherman has claimed Facebook’s Libra could benefit oligarchs, terrorists and drug kingpins.

A United States Democratic congressman has claimed “Mark Zuckerberg is sending a friend request to oligarchs, drug dealers, human traffickers and terrorists” by launching Facebook’s Libra cryptocurrency.

In a combative tweet on July 17, Brad Sherman described Libra as the “Zuck Buck” and he accused the Facebook CEO of deliberately attempting to circumvent America’s anti-money laundering laws.

Sherman’s post was accompanied by a mock Facebook screenshot that showed Zuckerberg sending drug kingpin Joaquin “El Chapo” Guzman a friend request.

Underneath, the billionaire’s other friends are listed as the Palestinian group Hamas (which the US and the EU designate as a terrorist organization), North Korean leader Kim Jong Un, Russian President Vladimir Putin, and registered sex offender Jeffrey Epstein.

A fiery hearing

Sherman took David Marcus, the CEO of Facebook’s Calibra crypto wallet, to task during an explosive hearing about Libra in Congress on July 17.

The congressman warned the Financial Services Committee that Libra was “the biggest thing this committee will deal with this decade” and rejected Marcus’s assertions that there was a distinction between Facebook and Libra.

Sherman demanded that Zuckerberg appeared before lawmakers, and even claimed that Libra had the potential to endanger America more than the 9/11 attacks orchestrated by Osama bin Laden. He went on to say:

“If cryptocurrency is used to finance the next horrific terrorist attack, 100 lawyers standing in a row, charging $200,000 an hour, are not going to protect his [Zuckerberg’s] rear end from the wrath of the American people.”

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Facebook’s Marcus: Libra to Satisfy All Regulatory Matters Before Its Launch

David Marcus, head of Facebook’s crypto wallet Calibra, stressed that Facebook will launch the Libra cryptocurrency project only after they address all regulatory concerns.

David Marcus, CEO of Facebook’s crypto wallet Calibra, underlined that Facebook would not launch the Libra cryptocurrency project before they address all regulatory concerns. Marcus delivered his comments at a hearing on Libra with the Financial Services Committee of the United States House of Representatives today, July 17, as reported by a Cointelegraph correspondent.

On the second day of hearings on Libra’s structure and management, Rep. Nydia Velazquez asked Marcus, “Will you commit yourself to not launch before all the concerns from the Federal Reserve and other regulators are addressed?” In response, Marcus said, “Absolutely.” Rep. David Scott followed up with a comment:

“Neither your white paper nor your subsequent Facebook post offered any concrete details as to how you plan to implement or enforce strong AML [anti-money laundering], how you plan to enforce KYC [Know Your Customer], and most important, to ensure the safety — and that’s what all of us are concerned with — of our financial system.”

Rep. Scott asked Marcus how the company envisions Libra’s responsibility to combat money laundering to protect the financial system. Marcus said that “blockchain gives additional information to law enforcement and regulators compared to our current system.”

Marcus also stated that he believes that they can improve the current system in order to preclude wrongdoers from using Libra for illicit activity.

Rep. Jim A. Himes noted that “users will have the profoundly unfamiliar experience of assuming foreign currency risk” and asked Marcus how the company is going to make foreign currency risk transparent. Marcus responded that Facebook will have educational tools built into the product.

As reported earlier today, committee chair Rep. Maxine Waters opened the hearing with an indictment of Facebook’s past behavior. In her statement, Waters noted a “demonstrated pattern of failing to keep consumer data private on a scale similar to Equifax.”

Waters also stated that Facebook, “allowed malicious Russian state actors to purchase and target ads,” which purportedly influenced the 2016 U.S. presidential elections.

On July 15, a day before the hearing, the Banking Committee released Marcus’ opening statements, where he stressed Libra and Calibra’s implications for commerce and consumers. “State financial regulators will regulate Calibra as a money transmitter, and the Federal Trade Commission and the Consumer Financial Protection Bureau will monitor for consumer protection and data privacy and security issues.”

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US Treasury Secretary Shares Trump’s Concerns on Crypto, Stresses Compliance

The United States Treasury Secretary echoed President Trumps’ recent tweets on crypto as a speculative asset largely used to fuel illegal activity.

United States Treasury Secretary Steven Mnuchin shares President Donald Trump’s concerns on the use of cryptocurrency to finance illicit activity, and stresses the role of enforcing FinCEN regulations with respect to crypto-dealing organizations. Mnuchin made his remarks at a press conference on July 15.

Mnuchin called the use of cryptocurrencies to fund illicit activity a national security issue, saying that billions of dollars have been used for this purpose:

“Cryptocurrencies such as Bitcoin have been exploited to support billions of dollars of illicit activity, like cybercrime, tax evasion, extortion, randomware, illicit drugs, human trafficking … This is indeed a national security issue.”

In response to a question from the press, Mnuchin further commented on the ostensible role of crypto as a means to finance crime, saying:

“I think to a large extent, these cryptocurrencies have been dominated by illicit activities and speculation.”

Secretary Mnuchin also echoed the Presidents’ latest Twitter posts on cryptocurrencies, saying: “As the President has said: ‘Bitcoin is highly volatile and based on thin air’” and “Treasury takes very seriously the role of the U.S. dollar as the world’s reserve currency.”

As previously reported by Cointelegraph, President Trump tweeted out a series of anti-crypto and anti-Bitcoin remarks on July 12, following his “Social Media Summit” for conservative personalities. Trump remarked that the value of crypto is “highly volatile and based on thin air” and that they can “facilitate unlawful behavior.”

According to Mnuchin, the Treasury has stressed — to Facebook and Bitcoin (BTC) users among others — that digital financial services are bound by the same Anti-Money Laundering and Combating the Financing of Terrorism policies as traditional institutions such as banks.

Additionally, he said that any crypto transmitters must comply with the Bank Secrecy Act (BSA) and register with the Financial Crimes Enforcement Network (FinCEN): a bureau of the Treasury. FinCEN is the federal regulator that implements the BSA in practice, and has authority over all money service transmitters — including cryptocurrency projects such as Libra.

Mnuchin also established the Financial Stability Oversight Council’s Working Group on Digital Assets, which reportedly includes key regulatory players such as the SEC, CFTC, and the Fed in addition to FinCEN. The idea of this group is to mitigate purported regulatory risks associated with cryptocurrencies.

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Bank of English Governor on Libra as a Solution to Financial Problems

Mark Carney discussed the problems Libra must address prior to launch, while noting the problems it aims to solve, commenting that they do indeed need a solution.

Bank of England governor Mark Carney said that people need to acknowledge the issues Facebook is attempting to solve with Libra, regardless of the project’s potential downsides. Carney delivered his remarks at the Financial Stability Report press conference as seen on the Bank of England’s YouTube channel on July 11. 

Carney said:

“It’s way too expensive to do domestic payments. It’s way too slow, and that hurts consumers and businesses. It stifles innovation, and it’s far too expensive to send money cross-border, and there are huge financial inclusion issues related to that and costs related to that. So, while we are trying to address all these issues, we have to absolutely acknowledge the problem that they’re trying to solve. And if it’s not this, we’d better have some answers for what else it is.”

However, Carney also believes that Libra, due to the massive scale of the project, has to be virtually perfect at the outset — at least from a financial security standpoint — in order for it to be released at all.

“It’s either successful or it isn’t. If it’s successful, it becomes systemic, because it would involve a very large number of users. And if you’re a systemic payment system, it’s 5-sigma. You have to be on all the time. You can’t have teething issues. You can’t have people losing money out of their wallets … The standards are in a different zip code — to use the American term.”

Carney went on to list a number of other problematic areas that Libra needs to address. Basis risk, rebalancing risk, managing underlying assets, facilitating anti-money laundering and counter-terrorism are all areas he believes need to be adequately addressed prior to launch. 

As previously reported by Cointelegraph, U.S. Federal Reserve Chair Jerome Powell recently made similar remarks about Libra, indicating that it needs to reach a high bar before the cryptocurrency project can proceed. However, in an earlier statement, Powell noted that the Federal Reserve does not “have plenary authority over cryptocurrencies as such,” though he claims the Fed still has “significant input into the payment system.”

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Top-6 Issues Experts/Entities Have With Libra

Experts and Lawmakers call for caution over potential risks of Facebook’s Libra cryptocurrency to the global financial industry.

Facebook’s unveiling of its Libra cryptocurrency has generated a lot of attention in the financial world, as well as in the crypto space. So far, the company has announced that its Libra blockchain network will be launched in 2020 and backed by a separate entity, the Libra Foundation. The cryptocurrency is set to enable users to make faster and cheaper international payments online, using platforms such as WhatsApp or Facebook Messenger.

The Libra currency

Just like any other cryptocurrency, Libra is set to have its own wallet called Calibra. Users would be able to send and receive Libra through this wallet by converting fiat currency from their credit cards into Libra coins. Third-party operators would also be allowed to sell the Libra cryptocurrency to users, and the entire process is set to be as simple as buying data for a mobile phone.

Facebook claims that the Calibra wallet “will have strong protection in place to keep your money and your information safe.” This claim has raised a lot of concern about data privacy and security, considering Facebook’s history of mishandling the data of its users. The company says that it plans to use the same verification and anti-fraud processes that are used by traditional credit card issuers and banks.

Libra is more of a stablecoin than an actual cryptocurrency in that its value will be pegged to several trusted currencies to prevent violent price fluctuations. Furthermore, Facebook plans to cede control of the Libra network to the Libra Association Council. The Libra Association Council is an organization that comprises founding members who operate the nodes of the Libra network.

This is not the first attempt by Facebook to create an in-house currency. In 2010, Facebook made moves to become a player in the digital currency space with Facebook Credits. Some reports believe that Facebook Credits were shut down due to an internal decision even though the company first intended for them to be used to pay for day-to-day activities, such as buying meals.

Related: Libra, TON and JPMorgan Coin Compared: Are They Heroes or Villains?

As it seems, Facebook is at it again with ambitious claims of using the Libra cryptocurrency to enable financial inclusion, potentially for billions of unbanked users in developing countries. The social media giant has, however, come under scrutiny from people who believe that Libra is a disaster waiting to happen. Furthermore, several countries have issued inquiries and even hearings regarding the regulatory repercussions of the use of Libra in their respective territories. 

U.S. lawmakers are skeptical of Libra

On July 2, Maxine Waters, a United States congresswoman and chairwoman of the House Financial Services Committee, wrote a letter to Facebook calling for the immediate cessation of any further development on Libra. According to the open letter, Facebook and its partners should pause any further development on Libra until the Financial Services Committee and affiliated subcommittees determine the possible risks Libra poses to the global financial system. The letter also referenced Facebook’s recent privacy scandals that involved data harvesting of over 50 million Facebook profiles. The letter stated: 

“Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action.”

On July 16, the Senate Banking Committee is planning to hold a hearing that will address the concerns over data privacy and the potential risks of the Libra project. Right after that, the House Financial Services Committee will also have a chance to examine Libra’s case on July 17. When asked whether Libra can actually cause a global financial crisis if left unchecked, Gregory Klumov, the CEO and founder of the euro-backed stablecoin issuer Statsis, told Cointelegraph that Libra cannot cause a financial crisis: “Most of the negativity comes from politicians. They’re afraid of losing their monopoly on financial oversight.” He further explained:

“The balance sheet of the association will not be leveraged. A financial crisis is impossible without excess leverage. Also, Libra’s coin might be recoverable if someone’s password is lost or stolen, similar to e-money like with PayPal or Skrill.”

While offering his response to the matter, Andrew Adcock, the CEO of Crowd for Angels, came out with a different opinion: 

“Libra, however, are seeking to utilize multiple assets as coverage, not just one type and are not seeking to be pegged. This could cushion a financial crisis if managed well with transparency and trust.”

Adcock, however, also believes that “the US congressman has shared the concerns and that Libra was launched when the US markets were sleeping probably shows the weight of their potential punch.”

History of Facebook scandals

Several experts recommend caution, considering Facebook’s history of mishandling user data — as was the case with Cambridge Analytica. Now that money is involved, people fear that Facebook could sell user spending and transactional data to banks and other interested third parties. After all, Facebook’s business model is to advertise by routinely allowing researchers to access user data.

According to Forbes contributor Enrique Dans, who is also a senior advisor for digital transformation at IE University, the Libra initiative has the potential to do well. However, he believes that if it were in the wrong hands, it could cause serious damage when it comes to trust. According to Dans, Facebook “has the worst reputation for privacy, along with ethical standards that have seen it involved in accusations of electoral manipulation and even genocide.” Although the company claims to be committed to securing user data, experts believe there is nothing stopping it from monetizing such data.

Facebook started off with a pledge to make the world more open and connected. But like many other experts, Dans believes that the only reason Facebook is planning to launch the Libra coin is to “capitalize on its huge user base.” According to the Libra white paper, Facebook will outsource the management of Libra to the Libra Association Council, an independent nonprofit foundation. However, David Marcus, the Libra head at Facebook and former president of PayPal, explained in a post:

“Facebook will not control the network, the currency, or the reserve backing it. Facebook will only be one among over a hundred members of the Libra Association by launch. We will not have any special rights or privileges.”

He also confirmed that, even though Facebook owns the Calibra wallet company, Calibra’s financial data will be inaccessible to Facebook. But, in response to this move to restore trust, Dans says that Facebook’s “malign philosophy is contagious“ and that it will eventually drag every other partner in the association “down to its murky levels.”

Libra security risks

According to Libra’s white paper, the Libra blockchain is set to be an open-source blockchain initiative that will offer developers a prototype in a prelaunch testnet. This will give developers an enhanced beta bounty program to identify bugs, vulnerabilities and flaws in the system before the official launch of Libra in the first half of 2020.

However, Facebook’s attempts to outsource Libra’s management and development — by allowing anyone to build products with access to billions of users — put a huge target on Libra that can be exploited by bad actors. Making Libra open-source will introduce security risks. These risks can potentially allow a black-hat developer to easily create a wallet that steals funds from users’ accounts. Even though Facebook claims that it will bear the cost of hacks on Calibra wallets, in the event of significantly large losses, the Libra white paper has not yet stipulated a system to solve such a problem. 

The letter from Congress also points out evidence of hacked crypto wallets, which has led to billions of dollars in loses. Therefore, Libra’s Calibra wallet also presents a huge risk to users and investors, who might end up using it. The lawmaker also highlighted how Libra’s white paper provided “scant information” about the project’s security features.

Lack of censorship resistance

In terms of technicality, Libra’s white paper also leaves many questions unanswered, especially when it comes to censorship resistance of the Libra blockchain. In fact, Mustafa Al-Bassam, one of the co-founders of Chainspace — the blockchain startup that was acquired by Facebook to scale research and development for Libra — points out some of the technical loopholes in the Libra white paper.

Al-Bassam is the only researcher on the Chainspace research team who did not join Facebook after the acquisition. According to a tweet thread he shared: 

“Libra could end up creating a financial system that is *less* censorship-resistant than our current traditional financial system.”

Libra’s technical philosophy attempts to solve the problem of scalability by first becoming a private blockchain with a select group of entities managing the Libra coin. However, Al-Bassam says that this presents a challenge when it comes to achieving censorship resistance. Most of the companies partnering with Facebook to form the Libra Association Council are U.S.-based companies, which include MasterCard, Paypal, Stripe, Visa and eBay, to mention only a few. According to Libra’s white paper, these entities will control the Libra network through an association-based model. Al-Bassam argues that this model of control on a blockchain network does not provide sufficient levels of censorship resistance. 

Related: Facebook’s Libra Coin: Initial Reactions Mixed

A spokesperson for MakerDAO, a blockchain-based company, told Cointelegraph that “Libra is built on a permissioned blockchain, which effectively means Facebook and its investors have a certain amount of centralized control over access, transparency and all data.” Even though Libra promises to switch to a permissionless network down the road, Al-Bassam says that, by the time the switch to a more censorship-resistant and open platform is implemented, the main central banks will have full control of the network. Klumov also agrees with Al-Bassam, arguing that: 

“Five years in the crypto industry might as well be an eternity. Both the technology and the market are developing so quickly, that no one can say for sure what will happen in five years. That’s as true of Libra as it is of any other crypto project.”

Libra is not a real blockchain

Despite the hype around Facebook getting into blockchain, the Libra coin has been criticized for not being a “real” blockchain in the true sense of the word. The Libra white paper ignores the decade-old blockchain research that has been achieved by the likes of Ethereum and even Chainspace and payments platform Algorand. 

The Libra blockchain does not have any benefits of distributed governance that is common with most blockchain platforms. Instead, Libra promises to be fully permissionless in about five years. Basically, most of the features that make up a blockchain seem to be missing with Libra. At its best, the single data structure that Libra possesses can be compared with Ripple.

Libra may not really help the unbanked

Facebook claims that it will use Libra to help the unbanked, who live in developing countries like Nigeria, Mexico, Bangladesh, China, Indonesia and India. However, Facebook is forbidden in places like China, and even jurisdictions like Indonesia, Bangladesh and Pakistan have previously put temporary bans on Facebook. In addition, developing countries and their governments have been hostile toward cryptocurrencies, with laws that seek to halt the use of cryptocurrencies. 

Basically, even as Facebook tries to launch a cryptocurrency that will give the unbanked inclusion in the global financial industry, its biggest threat remains to be the government authorities in those developing countries. Furthermore, individuals without access to bank accounts in developing countries are typically those with bad credit history or those who fail to comply with Know Your Customer (KYC) and other anti-fraud and Anti-Money Laundering (AML) requirements.

Realted: XRP, Libra and Visa to Fight It Out for Cross-Border Remittance Crown

Therefore, if Facebook is looking to be an alternative solution, it must ensure that the unbanked are compliant with KYC and AML procedures, otherwise Libra could be shut down. With a user base made up of billions of people from all over the world, it will be difficult for Facebook to completely verify the authenticity of its users.

In addition, Libra’s white paper does not seem to fully rationalize its claim to help the unbanked. The paper cites the World Bank’s data, which shows two-thirds of people globally do not have access to bank accounts. Conversely, the research also shows that the majority of the unbanked actually do not need bank accounts. In developing countries like Kenya, the so-called unbanked are still able to access the convenience of low transaction fees with instantaneous mobile payments without a cryptocurrency while using mobile payment services like M-Pesa.

It comes down to this…

The big question about Libra is whether people will actually use it once it launches. A spokesperson for MakerDAO also told Cointelegraph that it is too soon to predict whether Libra will cause a revolution: “Libra is in the white paper phase so the decisions about how this manifests — and whether they keep it truly open-sourced — will determine whether this is a transformative stablecoin or just another PayPal.” 

There is an argument that Libra can make international payment exchanges in emerging markets much cheaper and quicker. However, with Facebook’s data harvesting incidents in the past, even Marcus admits that convincing people of Facebook’s intentions will be “by far the most difficult, intellectually stimulating and challenging thing.”

While answering a question to lawmakers about how Libra would respond, Marcus admitted that, if regulation is not done right, “it could definitely present systemic risks.” He said:

“This is why we believe in and are committed to a collaborative process with regulators, central banks, and lawmakers to ensure that Libra helps with the kinds of issues that the existing financial system has been fighting, notably around money laundering, terrorism financing, and more.”

All in all, experts in the crypto space are of the opinion that, unless the issues discussed above are addressed in time, Libra could potentially dominate the crypto space and kill competition. Others believe that concerns about Libra are overblown and that Libra’s only real threat is that of digital identity and privacy.

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Canada: Crypto Exchanges Must Register With Financial Watchdog Next June

New AML laws will require Canadian crypto exchanges to register with the country’s financial watchdog FinTRAC next June.

Cryptocurrency exchanges in Canada will be legally required to register with the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) as of June 1, 2020, according to a notice published on July 10.

This requirement will come into effect along with other amendments to Canada’s new anti-money-laundering (AML) laws next year.

Crypto exchanges will also reportedly be required to observe Know Your Customer policies and report any suspicious transactions to the Canadian watchdog; this also includes keeping records of their clients and hiring a compliance officer for their platform.

A report by The Globe and Mail notes that up until now, compliance with these policies has been voluntary, but some exchanges have chosen to do so anyway. 

The motivation for implementing the new policies is reportedly to get Canadian banks onboard and in cooperation with cryptocurrency exchanges.

According to Lori Stein, a partner at business law firm Osler, Hoskin & Harcourt, Canadian financial institutions have historically been concerned about the risk of money laundering and terrorist financing via crypto exchanges. Stein said:

“The hope is that now that there is going to be a requirement to register and comply, and oversight by FinTRAC, that banks and other financial entities are going to be more open to providing services to and dealing with virtual-currency businesses.”

However, Stein points out that some international exchanges may not be willing to comply with the new Canadian rules. Some other experts reportedly agree, saying that having mandatory regulation requirements could result in cryptocurrency exchanges opting to exit from the Canadian marketplace.

The CEO of blockchain startup Bitaccess, Moe Adham, told The Globe and Mail, “I expect to see a number of firms relocate outside of Canada, as well as international firms limiting access to Canadians.”

The new regulatory policies may also drive crypto exchange customers away, some say. “This has the potential to drive cryptocurrency underground again,” said Canadian crypto exchange Coinsquare’s AML officer, Charlene Cieslik. Cieslik said that customers who do not want to reveal their information to exchanges, would likely just transact with each other directly.

As previously reported by Cointelegraph, a bill was signed in 2014 that required some foreign entities to register with FinTRAC for Bitcoin (BTC) payments.

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Fed Chair Says Facebook Needs to Satisfy Regulatory Concerns Regarding Libra

Federal Reserve chair says time is needed to address concerns about Libra, and that the project cannot move forward until there is broad satisfaction on regulatory policies.

Federal Reserve Chair Jerome Powell said there needs to be broad satisfaction with the way Facebook is handling regulatory concerns regarding its forthcoming stablecoin Libra. Powell gave his comments in a hearing before the House Financial Services Committee on July 10.

Rep. Steve Stivers asked Powell during the meeting, “if Facebook can’t sufficiently answer your questions about anti-money laundering, Know Your Customer, what would your message be to the banks that provide banking to Facebook, and what would your advice to Facebook be?” Powell replied:

“ … I just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering, all of those things. The number of concerns that I list at the beginning, data protection, consumer privacy, all of those things will need to be addressed very thoroughly and carefully.”

Powell also discussed how the project falls outside traditional regulatory bounds, highlighting the scale of the proposed cryptocurrency project:

“I think it’s something that doesn’t fit nearly or easily within our regulatory scheme. It does have potentially systemic scale.”

Chairwoman Maxine Waters also questioned Powell on whether the Fed has concerns about monetary policy with respect to Libra. Powell answered similarly, saying:

“Libra raises many serious concerns regarding privacy, money laundering, consumer protection, and financial stability. These are concerns that should be thoroughly and publicly addressed before proceeding.”

Powell previously testified on Libra in a press conference on June 19. When asked about the Fed’s role in regulating Libra, Powell suggested that they would not have direct authority, but would nonetheless be influential:

“… we don’t have plenary authority over cryptocurrencies as such. They play into our world through consumer protection and money laundering and things like that. But, I would say that … through international forums … we have significant input into the payment system and, as you know, play an important role in the payment system here in the United States.”

As previously reported by Cointelegraph, Maxine Waters, members of the House of Representatives Committee on Financial Services and a number of advocacy groups have called for a moratorium on Libra’s development.

David Marcus, the head Libra’s corresponding digital wallet service Calibra, has now replied both via a public Facebook post and in a letter to Waters and the committee to assuage their concerns and promise cooperation.

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Regtech Startup Coinfirm to Investigate XRP’s Compliance With AML Provisions

Regulation technology startup Coinfirm will investigate how cryptocurrency XRP is being used.

Regulation technology startup Coinfirm will investigate how cryptocurrency Ripple (XRP) is being used, Forbes reported on June 26.

San Francisco-based tech startup Ripple, which is largely behind XRP, has signed an agreement with Coinfirm, wherein the latter will explore XRP’s compliance with anti-money laundering (AML) provisions.

Within the investigation, Coinfirm will reveal information such as whether XRP has been processed by a “mixer” — a technology developed to make transactions more difficult to trace and therefore easier to launder crypto — clustering, which enables a user to send small amounts of currency through many different addresses — as well as whether the funds come from a known theft or hack.

The move comes in the wake of the Financial Action Task Force’s (FATF) announcement focused on digital currency’s role in money laundering and goals for heightened regulation released earlier in June.

The FATF is planning to strengthen control over cryptocurrency exchanges to preclude digital currencies from use in money laundering and related crimes. United States Secretary of the Treasury Steven Mnuchin said:

“By adopting the standards and guidelines agreed to this week, the FATF will make sure that virtual asset service providers do not operate in the dark shadows.”

In January, crypto analytics firm Messari published a report, alleging that XRP’s market capitalization could be overvalued by as much as $6 billion. The report stated that XRP’s liquid circulating supply could be overestimated by 48%, putting the “actual” market cap at $6.9 billion instead of the $13 billion reported on CoinMarketCap at the time.

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French Central Bank: Facebook’s Libra May Need Banking License

The Bank of France Governor said that Facebook’s Libra must comply with anti-money laundering regulation and seek banking licenses if it offers banking services.

Bank of France Governor Francois Villeroy de Galhau said that Facebook’s Libra stablecoin must comply with anti-money laundering regulation and seek banking licenses if it offers banking services, Reuters reports on June 25.

Per the report, while Villeroy admitted during an interview with French magazine l’Obs that there was room to improve cross-border money transfers. He also pointed out that Facebook’s libra project has to comply existing banking regulation because “the risks are increased by the anonymity that Libra users would have.” 

Villeroy also touched on possible requirements for a banking license:

“If the project seeks to go beyond payments to offering banking services like deposits, it will then have to be regulated like a bank with a banking license in all the countries it operates. Otherwise it would be illegal.”

As Reuters reports on June 25, alternate member of the Swiss National Bank’s governing board Thomas Moser, said at the Crypto Valley Conference in Zug reportedly said that he is open-minded about Facebook’s cryptocurrency project:

“Overall I think it’s an interesting development and I’m pretty relaxed about it. […] They have clearly indicated that they are willing to play according to the rules, they have been contacting the regulators.”

Head of the Bank of Italy’s head of market and payment system oversight allegedly declared that he wants to have more information about the Libra project. 

As Cointelegraph recently reported, French Minister of the Economy and Finance intends to “ask for guarantees” from Facebook in regards to its forthcoming digital currency Libra. Maire also asked the governors of the G7 central banks to report what guarantees are to be obtained from Facebook.

Yesterday, a former economic adviser to United States President Donald Trump expressed support for Facebook’s stablecoin Libra.