Stablecoins presented themselves as alternatives to traditional cryptocurrencies by providing a less volatile option while still maintaining some of the advantages that make cryptocurrencies so popular.
This has caused the popularity of stablecoins to increase rapidly with investors in the United States. There are a number of stablecoins being launched with Facebook’s Libra being a high-profile example. As a way to regulate stablecoins, a US representative has introduced a bill that would classify them as securities.
Rep. Sylvia Garcia recently published a draft bill that would clear up the regulatory uncertainty about stablecoins.
Under the new bill, stablecoins would be considered as securities and would be handled by the Securities Act of 1933. This bill introduces legislation to the House Financial Services Committee which would make it legal.
According to the bill,
It is the sense of Congress that— (1) digital assets, known as managed stablecoins, are investment contracts and therefore are securities within the meaning given the term in section 2(a) of the Securities Act of 1933; and (2) because issuers of managed stablecoins nevertheless maintain that managed stablecoins are not securities, it is appropriate for Congress to provide clarity by amending statutory definitions of the term security to include managed stablecoins.
Cryptocurrencies have been plagued by the fact that they fall in a regulatory gray area. One of the biggest obstacles into getting bitcoin and other popular cryptocurrencies accepted by governments across the world is over the fact that governments cannot control cryptocurrencies properly and that there is no regulatory framework for it. With stablecoins being pegged to real-world currency, it is easier to understand and regulate.
One of the reasons for this bill being introduced at this time is because Facebook’s stablecoin Libra is starting to make waves. Facebook made an official announcement in June 2019 and released a whitepaper outlining its plans for Libra. Since then, Libra has faced a massive backlash in America and Europe. This bill looks to not only address all those concerns which will help Libra but also other stablecoins in the future.
If the bill does get all the approval it requires and becomes a law, it will give the Securities and Exchange Commission (SEC) authority over all stablecoins. That would settle many worries and clear up the question about the legality of this particular kind of digital assets.
However, there is still a long way to go before this draft bill becomes a law. It will need to pass through several hurdles including clearing the House of Representatives and getting approved by the President.