Today a bipartisan team of U.S. senators introduced a bill called the “Managed Stablecoins are Securities Act of 2019”, which would make Facebook’s cryptocurrency Libra a security under U.S. law.
On Thursday, members of the House Financial Services Committee Sylvia Garcia, D-Tex., and Lance Gooden, R-Tex., proposed a bill at a hearing on the role of big data in financial services. According to Garcia, Libra and other managed stablecoins are securities under existing law, and “bringing clarity to the regulatory structure of these digital assets” helps protect users and guarantees proper government oversight.
Additionally, Gooden stated that “everyday investors need to know they can trust the issuers behind their financial assets,” thus this bill will help consumers understand the underlying properties of the assets they buy by applying the laws used to regulate financial securities.
Facebook CEO Mark Zuckerberg has stated in the past that the Libra stablecoin is not a security, despite a memorandum issued by the U.S. Congress earlier this year which stated that the Libra stablecoin “could be classified as security since it is intended to be sold to investors to fund startup costs and would provide them with dividends.” Zuckerberg declared at a hearing at the House Financial Services Committee in October that Facebook would not pursue the launch of Libra unless it receives the approval of U.S. regulators.
If the bill is approved, Libra would be faced with a lot more scrutiny than it has already, as it would have to abide by stricter regulations. Nevertheless, Facebook has repeatedly stated that Libra is a digital payments system.
According to the head of the Libra wallet Calibra Wallet, David Marcus, “Libra can be the protocol that will enable fast, cheap, and stable money movement across service providers, institutions, and people all around the world.”
This isn’t the first time Libra has been addressed by regulatory agencies. In September, senior U.S. Treasury official Sigal Mandelker stated that “anti-money laundering and combating the financing of terrorism has to be built into [Libra’s] design” from the beginning, to ensure the stablecoin meets U.S. regulatory standards.
Soon after, Minister of the Economy and Finance of France Bruno Le Maire claimed that the government would not authorize Libra in Europe as it threatens the “monetary sovereignty of states.” Managing director and chief operating officer of the Libra Association Bertrand Perez stated that they are aware of money laundering and terrorist financing issues, and that the Libra team needs to work with regulators in order to address those issues, but that it wouldn’t affect the stablecoin’s original release scheduled for 2020. This was followed by the French and German governments blocking Libra’s development path by releasing a joint statement in which they declared that “no private entity can claim monetary power, which is inherent to the sovereignty of nations.”