US Government fears Bitcoin become next Swiss bank account

6 years ago - Published in Fintech Land

The US Treasury Secretary, Steven Mnuchin, stated that he’s “concerned consumers could get hurt” by using cryptocurrencies. To this he further declared that he would be working with the Group of 20 nations to prevent cryptocurrencies such as bitcoin from becoming the digital equivalent of an anonymous Swiss bank account.

Mnuchin, during an interview at the Economic Club of Washington, said that the Financial Stability Oversight Council (FSOC) created a working group to examine digital currencies like bitcoin.

Mnuchin said Friday that his primary concern with cryptocurrencies is their potential use for money laundering or illicit finance. “We want to make sure that bad people cannot use these currencies to do bad things,” Mnuchin said, insisting companies that run cryptocurrency holding accounts are subject to the same know-your-customer laws as banks.

In his interview, Mnuchin likened bitcoin to a “Swiss bank account.” While U.S. laws require banks to know their customers, regulation in other countries is more fluid. Switzerland, long famous for its tight-lipped bankers, is the most prominent such example.

According to Mnuchin, bitcoin trading firms have an obligation to track bitcoin transactions. “We can track those activities. The rest of the world doesn’t have that, so one of the things we will be working very closely with the G-20 is making sure that this doesn’t become the Swiss bank account,” he said.

Mnuchin said the US authorities, including the Federal Reserve, were studying the advantages and disadvantages of issuing digital dollars instead of hard cash, but “the Fed and we don’t think there’s any need for that at this point.”

Mnuchin added that he is “not at all” worried that Russia may use cryptocurrencies to help its banks avoid international sanctions. An adviser to President Vladimir Putin is reported to have said that sanctions against Russia have created a need for digital currencies as their officials fear expansions in 2018.

The Treasury secretary is the chairman of the FSOC, which also includes the chairmen of the Federal Reserve, Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) and Federal Deposit Insurance Corporation, along with the Comptroller of the Currency and director of the Consumer Financial Protection Bureau.

The SEC, CFTC and Fed have all issued formal warnings about the risks of cryptocurrency investments, and plan to boost their oversight of that sector.

The SEC has warned investors that firms and brokers who offer cryptocurrency investments are often breaking federal trading laws. The CFTC has announced plans to review bitcoin futures trading, and both SEC Chairman Jay Clayton and CFTC Chairman Christopher Giancarlo will testify in February before the Senate Banking Committee during a hearing on cryptocurrencies.