President Donald Trump on Thursday sharply criticized Facebook’s plans to enter the cryptocurrency market, tweeting that the U.S. has “one real currency” and suggesting the social-networking giant may need to submit to heightened banking regulation.
In a series of tweets, Trump said Facebook’s plans to help launch the currency, called Libra, would have “little standing or dependability,” warning that if Facebook wanted to become a bank it should seek “new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International.”
Facebook announced its plans for Libra and Calibra, a subsidiary that shares the name of a virtual wallet service, earlier this month. The social networking giant plans to make the cryptocurrency available to its roughly 2 billion users worldwide, and it will be run through an association based in Switzerland.
Asked about Trump’s tweet, Facebook pointed to previous statements from Dave Marcus, who oversees Calibra. “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,” he said earlier this month.
Libra is not tethered to a specific currency, such as the dollar, but Facebook has said that members of the association would each invest at least $10 million in the project so that it is “fully backed by a reserve of real assets.” The setup differs from other decentralized cryptocurrencies, including bitcoin, which Trump also criticized Thursday.
Still, Facebook’s plans have sparked international backlash, including bipartisan scrutiny in the United States. Jerome Powell, the chairman of the Federal Reserve, told Congress this week that the Libra virtual currency raises “many serious concerns,” including threats to privacy, risks of money laundering and other potential troubles for the whole of the financial system.
“These are concerns that should be thoroughly and publicly addressed before proceeding,” Powell said Wednesday in comments that resulted in a dip in bitcoin’s value.
Earlier this month, Democrats on the House Financial Services Committee asked Facebook to “agree to a moratorium” on introducing its cryptocurrency and wallet, describing it as “an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar.” The panel is one of two that has summoned Facebook to testify about its plans at congressional hearings next week.
Trump has rarely weighed in on bitcoin and other cryptocurrencies, leaving it to the Federal Reserve and Treasury Department to study. But Facebook’s endeavor has clearly drawn more attention, given its size, international scale and previous entanglements with federal regulators on issues such as privacy.
Trump’s suggestion that Facebook must submit to formal bank regulation could threaten the company’s entire effort to launch Libra. For decades, commercial firms have toyed with the idea of operating as partial banks, only to shut those plans down when directed to be regulated as banks. If Facebook did have to register its services as a type of banking, it could be forced to allow the Federal Reserve to scrutinize its entire business operation. It would also give the Treasury Department more power to investigate its anti-money laundering controls.
Powell said earlier this week that Fed officials met briefly with Facebook executives when the company was planning Libra, but did not tell the company it was comfortable with how Facebook would operate the service.
Trump’s tweet, unusual in its technical detail, could be seen as a signal to other global regulators who are also mulling what to do with Facebook’s planned expansion. Finance ministers and central bankers from seven of the world’s largest economies plan to meet within weeks in France to discuss Libra, among other things. If the U.S. takes the lead in raising concerns, it could force other countries to try to slow the process down as well.
Trump’s decision to defend the role of the U.S. dollar in his tweet is also striking, as it suggests a level of concern within the White House that the dollar’s role in international financial markets could somehow come under threat from a social media company.