Facebook's digital currency can trigger new D.C. matches
Facebook's upcoming move to offer a digital currency will create a new regulatory minefield for a company whose privacy practices have already provoked attacks by lawmakers in the United States and Europe.
The closely guarded but much-discussed cryptocurrency The initiative, codenamed "Project Libra", can become an important e-commerce tool for Facebook users across the social network service package, from Instagram to messages, but as with other cryptocurrencies like Bitcoin, the new Facebook coin [19659005] can be a tool for whitewashers and terrorist finance, a risk that has drawn lawmakers and regulator's attention.
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Proje ct is expected to be unveiled on Tuesday, where more details will be released.
A Facebook equivalent of Bitcoin can allow users to buy products from popular Instagram influencers faster and easier than with cash – while remaining within the company's social media domain. And more importantly for Facebook shareholders, the company can make money on a fee for each processed transaction.
"Facebook can use cryptocurrency as a payment mechanism to eliminate friction across its various services," analysts at Merrill Lynch said in a report June 14. "We see the launch as an important initiative for the company, as it builds a more private messaging system with e-commerce sites."
The global coin is initially expected to be available in around 12 countries, including the United States and the United States. United Kingdom Using the digital asset does not require a bank account, and its value will be linked to a group of established government-bonded currencies such as dollars and sterling, according to media reports. The operation will be based in Switzerland.
But with this huge step in the tightly regulated financial market, the company will postpone a type of regulatory intrusion that is not common in its traditional world of online media. Chief of the concerns, according to experts, are the possibilities that Facebook's global coin can be money laundering by using the company's main website and its sister platforms WhatsApp and Instagram.
"Facebook coin will make money laundering that Facebook did for fake news – probably lead to an explosion in terrorist financing," said Charlie Delingpole, CEO of Comply Advantage, a money laundering consultant.
Bank of England Director Mark Carney met Facebook founder and CEO Mark Zuckerberg to discuss these plans in April, according to the Guardian.
The following month, US Sens. Mike Crapo (R-Idaho) and Sherrod Brown (D-Ohio) wrote the two top members of the Senate Banking Committee, to Zuckerberg asking how Facebook's cryptocurrency system would work.
"The outreach has been to financial regulators to ensure it meets all legal and statutory requirements?" A spokeswoman for Crapo said the Senator did not receive a response from Facebook.
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Last month, State Secretary Steven Mnuchin said his department is monitoring cryptographic curves in its efforts to turn off funds for illegal activities.
Earlier this year, another state-authorized official said that cryptographic costs are tools – such as cocaine and Rolls Royces – that criminals constantly use to store value and are a "huge" concern for US national security and sanction enforcement.
A congressional hearing in the house or senate to claim responses from Facebook leaders about how its crypto-product would work is likely in the coming months, lawyers involved in the digital real estate industry refused to be named to speak freely about the company .
A spokesman for Facebook refused to comment.
In the EU, wh ich already has strict rules for payment companies, a new set of rules comes into force next year, just as Facebook must build speed for its coin product.
The Fifth European Money Laundering Directive, or AMLD5, kicks in on January 10, with stricter requirements to identify the recipients of transactions and the collection and sharing of information, including for digital asset operators and prepaid cards.
Fines for alleged AML defaults have entered into Thousands of Billions of Dollars over the years for banks around the world.
"Certain regulators, some of which have been fundamentally opposed to cryptocurrency and Bitcoin since Day One, will certainly see [Facebookâs] global coin as a tool It could potentially be used for money laundering," says Jay Zhou, marketing leader in Loopring, an open source code protocol to build decentralized exchanges. "It will be up to Facebook to prove that they are wrong."
With a crypto competition product, Facebook must adhere to the same money transfer laws applicable to banks and companies such as Western Union.
As a part of their Facebook probably needs a "BitLicense" from New York state said Sarah Brennan, a partner at the law firm Lippes Mathias in Buffalo, NY
BitLicenses, awarded by the State Department of Financial Services, has been awarded to conventional cryptocurrency firms such as Circle Internet Financial and Winklevoss Twins & Gemini Trust Co. But any business that wants to Making digital currency transfers will probably need New York's permission. [19659004] Facebook has spoken to the Commodity Futures Trading Commission about its proposed digital currency, the Financial Times reported earlier this month. The company will also have to talk to the SEC if it wants the coin to be traded by people separately from the company's platforms. The SEC will try to regulate Facebook's mint as security if the product is designed to be transferred to third-party digital wallets, Brennan said.
A SEC spokesman refused to comment.
Facebook wants its mint available widely, said Brennan. "It's a much more convincing product from a business perspective," she said. "It seems they are planning it. You will not come anywhere if you offer it as a salary to your employees and they cannot solve it for anything outside Facebook."