Two U.S lawmakers are proposing to classify stablecoins as securities in a bid to protect consumers. However, the Libra Association says the move will only push back innovations in blockchain and cryptocurrency technology.
Reps Gooden and Garcia
Texas Representatives Lance Gooden and Sylvia Garcia, recently proposed the “Managed Stablecoins are Securities Act of 2019.” If passed, the legislation would put a more significant part of regulation on the shoulders of projects like Libra.
Rep. Garcia explained in a statement that it’s apparent under current legislation that stablecoins like Libra are securities. The bill will clarify the statue and “remove any ambiguity” about the subject.
Meanwhile, Rep. Gooden reiterated the idea that Congress should spearhead how the digital space and crypto technology will be shaped. The co-sponsor of the managed stablecoin bill said that it’s Congress’ responsibility to “clarify the regulatory framework” stablecoins will use. He pointed out how crucial it is now that mainstream companies are providing these currencies to consumers.
While consumer protection appears to be the crux of the bill, some sectors are saying the move will place the bulk of the regulatory burden on stablecoins. Securities laws in the U.S already carry a long list of compliance and reporting requirements.
Dante Disparte, the Head of Policy and Communications of the Libra Association, said in an email that they’re not contesting the importance of responsible innovation of financial services and having regulatory oversight.
Disparte also pointed out that Libra was developed to become a payment infrastructure that will help empower the billions of consumers on the fringes of the current network. He added that the Libra Coin is an agent for an immediate payment system that’s “low friction and high trust.”
Because Libra hasn’t launched yet, there are still questions as to what kind of token the project will use. The Association hinted in October that it might forego the initial plan of designing a single token supported by different national currencies. Instead, it might opt for a fiat-backed stablecoin.
Garcia and Gooden’s proposed bill constituted another direction in the rising movement of government agencies in various Western countries seeking to put tough regulatory challenges in front of stablecoin projects. International groups like the G20 and some organizational divisions in the U.S have raised several concerns about stablecoins.
If approved, the bill could become another regulatory roadblock to Libra’s acceptance in the U.S. Blockchain, and crypto legal specialist Max Ambrose noted that a tremendous burden would be placed on the project. He also pointed out that the bill could stop Libra from operating in the country.