November 22, 2019 by Tim Fries at thetokenist.io
On November 21st 2019, a bipartisan group of US Senators proposed a new bill, titled the “Management Stablecoins are Securities Act of 2019”. If approved, the legislation would make ‘managed stablecoins’ — to include Libra — securities, and subject to a number of additional regulatory hurdles.
The New US Legislation Claiming Libra is a Security Explained
Yesterday, Representatives Sylvia Garcia (D-TEX) and Lance Gooden (R-TEX) proposed a new bill which would officially declare both Libra and other ‘managed stablecoins’ securities. While introducing the bill, Garcia explicitly called out Libra, claiming it and other Stablecoins “are clearly securities under existing law”. Both Garcia and Gooden are members of the House Financial Services Committee.
An overwhelming majority of digital assets feature a clouded regulatory status — at least in the eyes of consumers. It’s precisely this type of regulatory clarity that the bill aims to bring to purchasers of such financial instruments. According to Gooden,
“In what are called ‘managed stablecoins’, we have trusted brands marketing digital assets to consumers as secure and stable. Everyday investors need to know they can trust the issuers behind their financial assets. This bill would bring them the security they deserve by applying the laws we use to regulate financial securities to this new breed of digital currencies.”
Garcia also argues that regulatory clarity will only help in protecting consumers who use these types of digital assets. She says,
“Bringing clarity to the regulatory structure of these digital assets protects consumers and ensures proper government oversight going forward.”
Is Facebook’s Libra a Security Token?
Regulators around the globe have been notably hesitant to support the development of Libra. US Lawmakers have expressed growing concerns over Libra’s ability to rival the US dollar and ultimately, the US economy. Even G7 — an intergovernmental organization comprised of seven of the world’s leading economies — has produced reports highlighting the risks that assets such as Libra pose.
Besides the concern over its risks along with the role of big data integrated with financial services, there remains ambiguity when it comes to Libra’s legal classification. Since its inception, Facebook has repeatedly stated Libra would not be deemed a security. However, US Congressman Warren Davidson (R-OH) previously said he thinks Libra should be regulated as a security — the same stance proposed by the new legislation submitted by US Senators yesterday.
If the legislation sees approval, Libra would constitute a security token. Yet Facebook has consistently argued against Libra as a security. In contrast, the social media giant has said Libra will be backed by several currencies, including the US dollar. Facebook’s crypto executive David Marcus has claimed Libra is drastically different from both securities and other cryptocurrencies such as Bitcoin.
In October, Facebook CEO Mark Zuckerberg met with US Congress members in a committee hearing, where Garcia was in attendance. She hoped Zuckerberg would have answers regarding Congress’ many questions on Libra, but ultimately left the hearing “disappointed”.