Congress may consider a bill to classify stablecoins – cryptocurrencies whose values are pegged to a fiat currency or other assets – as securities.
In a draft bill published Tuesday, Rep. Sylvia Garcia (D-Texas) introduced legislation to the House Financial Services Committee to regulate stablecoins under the Securities Act of 1933, seeking to provide clarity in an area the bill suggests lacks regulatory guidance.
The bill states:
“The market value of such digital asset is determined, in whole or in significant part, directly or indirectly, by reference to the value of a pool or basket of assets, including digital assets, held, designated, or managed by one or more persons.”
The proposed legislation appears to be a response to the Facebook-led Libra cryptocurrency, which the social media giant introduced in June 2019. The cryptocurrency is meant to be a stablecoin pegged to a basket of fiat currencies.
Lawmakers have urged Facebook and its partners not to launch Libra – and indeed, to halt all development entirely – until regulatory questions around the project and its governance can be resolved.
Facebook CEO Mark Zuckerberg is scheduled to testify before the committee on Wednesday.
If signed into law, the rule would give the U.S. Securities and Exchange Commission (SEC) jurisdictional authority over all stablecoins and their issuers.
The bill’s introduction does not mean it will ever become law: First, it would need to be voted out of committee, passed by the House of Representatives, taken up and passed by the Senate and signed into law by the U.S. President. It is unclear what sort of support the bill has at present.
However, former Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler believes Libra already looks like a security, testifying before the Financial Services Committee in July that the project looks similar to an exchange-traded fund, which does fall within the SEC’s purview.
The bill was introduced jointly with another draft bill sponsored by Rep. Michael San Nicolas (D-Guam), which would bar national security exchanges from listing a security by an issuer if the issuer or an executive affiliated with it received compensation in the form of a managed stablecoin.
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