Skip to main content

Some Set Of US Lawmakers Wants to Brand Libra To Be Considered a Security Asset?


A couple of United States lawmakers are looking to classify stablecoins as securities. With Libra considering adopting fiat-pegged stablecoins rather than a single token supported by a basket of national currencies, the proposed crypto project might be facing another regulatory hurdle.
Meanwhile, lawmakers sponsoring the bill say stablecoins should be classified as securities to protect U.S. consumers. If passed, stablecoin projects like Libra will potentially fall under the purview of stringent U.S. securities regulations.
Critics of the move remark that such measures only serve to further dampen the country’s position in the emerging digital landscape. Some commentators have long accused regulators of chilling innovation in the U.S. crypto and blockchain space.
Libra maintains that its proposed stablecoin project is a commodity. The association is also moving forward with developing the payment system, recently releasing updates on the state of its testnet and detailing the number of transactions carried out so far.

LAWMAKERS SUGGESTS “MANAGED STABLECOINS” TO BE CLASSIFIED AS SECURITY

As previously reported by Cointelegraph, two Texas representatives — Lance Gooden and Sylvia Garcia — have proposed a piece of legislation that will classify stablecoins as securities. Named as the “Managed Stablecoins are Securities Act of 2019,” the bill, which is sponsored by representatives from both sides of the aisle, could place an even greater regulatory burden on stablecoin projects like Libra. In a statement quoted by The Hill, Rep. Garcia remarked:
“Managed stablecoins, such as the proposed Libra, are clearly securities under existing law. This legislation simply clarifies the statute to remove any ambiguity.”

A co-sponsor of the bill, Rep. Gooden, also echoed the sentiment that Congress should take the lead in shaping the legal landscape for cryptos and the digital space at large. According to Gooden, “It’s the responsibility of Congress to clarify the regulatory framework that will apply to stablecoins, especially now that mainstream institutions are offering them to consumers.”
It appears that consumer protection concerns are at the heart of lawmaker endeavors to put stablecoins under the security token paradigm. However, such a move increases the regulatory burden on stablecoins, as U.S. securities laws contain a litany of reporting and compliance requirements.
Cointelegraph reached out to the Libra Association for comments about the proposed bill. In its email response, Dante Disparte, the association’s head of policy and communications, remarked:
“We maintain that responsible financial services innovation and regulatory oversight are not in contest. The Libra payment system is designed from the ground up to serve as a payment infrastructure that can empower billions of people left on the margins of today’s networks. The Libra Coin is simply a proxy for an instantaneous payment system that is low friction and high trust.”
With Libra yet to launch, it remains unclear exactly what type of token the project will utilize. In October 2019, the association hinted that it might abandon its original plan of creating a single token supported by a basket of national currencies in favor of a fiat-pegged stablecoin.
The bill before Congress represents another development in the emerging trend of government authorities in Western countries looking to place stringent regulatory hurdles along the path of stablecoin projects. Several regulatory agencies in the U.S. as well as international organizations like the G-20 have expressed concerns about stablecoins.

ANOTHER POTENTIAL HURDLE FOR LIBRA? 

If passed, the bill could potentially serve as another regulatory impediment on the path of the Libra project in the U.S. In an email to Cointelegraph, crypto and blockchain legal expert Max Ambrose highlighted how much of a burden the proposed bill could have on Libra:
“It will require Libra to follow substantial regulatory requirements imposed by the SEC that they are hoping to avoid altogether. These regulatory requirements increase legal costs and will tie Libra’s hands on numerous investment-related issues, requiring them to operate within specific bounds which the SEC and lawmakers can carve out.”
The added compliance burden for Libra would be to such an extent that, as Ambrose remarked, “The bill may entirely prevent Libra from operating in the US,” but the likelihood of such will depend on whether the association chooses to follow local regulations. He added:
“Libra’s argument that it is not a security is further evidence of the hardships they will face if they are subjected to US securities laws and regulations.”
Joe DiPasquale, CEO of BitBull Capital — a crypto and blockchain hedge fund firm, echoed similar sentiments declaring that stablecoins being classified as securities in the U.S. could hurt Libra’s operation in the country. Writing to Cointelegraph, DiPasquale declared that classifying Libra as a security would limit the flexibility of the project’s operation in the U.S.
A security token designation might not be the only worry for Libra in the U.S.: Earlier in November, Kenneth Blanco, director of the U.S. Financial Crimes Enforcement Network, declared that businesses that conduct stablecoin transactions must register as money services businesses.
Since the release of the project’s white paper, Libra has been facing criticism from several regulatory stakeholders both within and outside the U.S. While much of the initial objection to the project appeared to stem from Facebook’s involvement in the Libra Association, recent events seem to point toward governments wanting to stake a firm stance against the project as a whole.

SHOULD STABLE COINS BE CONSIDERED SECURITIES?

With the bill already before Congress, part of the developing conversation is circling around whether stablecoins are securities. In the U.S., the Howey Test is the standard for classifying investment instruments as securities.
So far, the U.S. Securities and Exchange Commission has elected to utilize the Howey Test rather than create another standard specifically for crypto. According to Ambrose, Congress reserves the right to create a legal framework for determining whether crypto tokens should be seen as securities. As part of his email to Cointelegraph, Ambrose said:
“The legal basis to classify a cryptocurrency as a security is up to lawmakers (e.g., Congress) and regulatory agencies (e.g., the Securities Exchange Commission, aka SEC), so if this bill passes, Congress is effectively creating the legal basis for the classification. It becomes irrelevant whether Libra is or is not a security under current law, because it would be classified as a security under the new law.”
However,in our thoughts and looking at the performance of stablecoins in the space we strongly believe that stablecoins could as well be considered and classified as security assets.
In summary, the Howey Test classifies an investment instrument as a security if it:
  • Involves monetary investment.
  • The investment is in a common enterprise.
  • There is an expectation of profit from the investment.
  • There is an expectation of profit due to the efforts of the promoter or third-party.
Sponsors of the bill argue that managed stablecoins constitute investment contracts and are therefore securities under the paradigm of the Securities Act of 1933. Earlier in November 2019, the International Organization of Securities Commission declared that some stablecoins might be securities.
According to the IOSCO, some stablecoin implementations possess certain features typical of securities. Thus, the international securities regulator maintains that regulators would be correct in classifying some stablecoins as securities.
However, the Libra Association maintains that while regulators and lawmakers have to consider consumer protection laws, the steps they take should not inhibit the growth of the digital asset space. Disparte remarked to Cointelegraph:
“We recognize that stablecoins are an emerging technology, and that policymakers must carefully consider how this fits into their financial system policies. However, we believe that it is important to regulate activities and not technologies, allowing for responsible innovation to flourish.”

BETTER DAYS AHEAD...

Some U.S. crypto and blockchain stakeholders have lamented the current state of regulations governing the country’s digital asset space. Earlier in 2019, Jeremy Allaire, the CEO of Goldman Sachs-backed Circle — a crypto payments firm — declared that unclear U.S. crypto regulations were forcing companies to move their projects to other countries.
Indeed, during hisrecent appearance before Congress, Facebook CEO Mark Zuckerberg sounded a note of caution against stringent digital regulations in the U.S. According to the Facebook chief, such measures are handing over control of the emerging digital economy to China.

Comments

Popular posts from this blog

  Pick a niche The Blockchain and Crypto space is large and full of opportunities. Most people limit the industry to just a place to trade and make quick cash little do they know that you can actually build a career and achieve much more. There's a lot of skills required in blockchain technology. Firstly, you can become a trader, a day time trader or night trade it all depends on your schedule. You can actually make 10 to 20% of your capital daily or even more depending on the volume of your capital and trading strategy. you can become an investor who spots good coins and invests in a project you believe will do well, you can hodl, meaning you can buy and hold for short or long term period.  OTC trading is actually underrated, you can become an over the counter trader by just buying and selling cryptocurrency through the P2P Platforms or escrow groups, there's a lot of money to be made here if you move volumes on a daily. You can become an expert in technical analysis and give
WHAT YOU NEED TO KNOW ABOUT  NON FUNGIBLE TOKENS NFTs (or "non-fungible tokens") are a kind of digital asset with a unique kind of token-unlike other assets like bitcoin and dollar bills which have a particular and fixed amount that is accepted by all, NTFS have a unique price for every token. Every NFT is Unique, they can be used to authenticate ownership of digital assets like musical records, artwork, virtual real estates and pets. NFTs could be likened to a kind of certificate of authenticity for digital artefacts. They're are actually been used to sell a huge range of collectables currently including: *A tweet by Dallas Mavericks owner and entrepreneur Mark Cuban. *Video art by Grimes *The Original "Nyan cat" meme *Virtual real Estate in a place called Decentraland  and others...   As other digital assets like Bitcoin and other cryptos has grown in popularity over the years, NFTs have also soared — growing to an estimated $338 million in 2020. Each NFT is s

Differentiating Scam Crypto Projects And Legit Projects

Since Bitcoin became mainstream, we have seen countless scam schemes that claim to be crypto projects but are just scam projects that seek to cart away with investors money. a whole lot of them have succeed and are still succeeding in doing this. the reason why they keep getting away with this schemes, is that a lot of crypto enthusiasts and investors don't have a proper knowledge of how the cryptocurrency space works. This is the reason why we have decided to put some contents together both on our YouTube channel and podcast to give investors and especially newbies the heads up to figure out when scam projects come knocking. The crypto space is in its early stage with peculiar opportunities as well as challenges. There are scammers in probably every walk of life, seeking and exploring new ways and opportunities to extort their victims. below we will discuss give key points to figure out a scam or ponzi project. Five ways to know scam or crypto projects Important to