Lawmakers introduce bill to 'protect' consumers from Facebook's digital currency

Lawmakers introduce bill to 'protect' consumers from Facebook's digital currency
© Aaron Schwartz

A pair of lawmakers on Thursday introduced legislation that would place stringent government oversight on Facebook's incoming digital currency and similar projects. 

The bill from Reps. Sylvia GarciaSylvia GarciaHillicon Valley: Senators ask Trump to halt Huawei licenses | Warren criticizes Zuckerberg over secret dinner with Trump | Senior DHS cyber official to leave | Dems offer bill on Libra oversight On The Money: Trump signs short-term spending bill to avoid shutdown | Pelosi casts doubt on USMCA deal in 2019 | California high court strikes down law targeting Trump tax returns Lawmakers introduce bill to 'protect' consumers from Facebook's digital currency MORE (D-Texas) and Lance GoodenLance GoodenHillicon Valley: Senators ask Trump to halt Huawei licenses | Warren criticizes Zuckerberg over secret dinner with Trump | Senior DHS cyber official to leave | Dems offer bill on Libra oversight On The Money: Trump signs short-term spending bill to avoid shutdown | Pelosi casts doubt on USMCA deal in 2019 | California high court strikes down law targeting Trump tax returns Lawmakers introduce bill to 'protect' consumers from Facebook's digital currency MORE (R-Texas) would place the Libra digital coin squarely under the Securities and Exchange Commission's jurisdiction, a move that would subject the cryptocurrency to a set of extensive and well-established regulations.

Facebook has denied that the Libra coin is a security. But lawmakers have struggled to understand how to classify the ambitious Libra project because the U.S. government has not yet defined which federal agencies will be in charge of regulating cryptocurrencies. 

ADVERTISEMENT

"Managed stablecoins, such as the proposed Libra, are clearly securities under existing law," Garcia said in a statement. "This legislation simply clarifies the statute to remove any ambiguity. Bringing clarity to the regulatory structure of these digital assets protects consumers and ensures proper government oversight going forward." 

Gooden said it is Congress's role to "clarify the regulatory framework" for digital currencies like Libra, which will likely be pegged to government-backed currencies like the dollar. The Libra coin has been classified as a "stablecoin," meaning it is backed by a basket of currencies held in a reserve. 

"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," Gooden said. 

The Libra project has faced intense skepticism and pushback from regulators around the world since Facebook announced its plans over the summer. Since then, Facebook has abdicated control over the project and can no longer speak for the broader Libra Association, a 21-member entity tasked with overseeing the cryptocurrency’s launch.

The Libra Association's head of policy and communications, Dante Disparte, said the group supports "responsible financial services innovation and oversight."

"We recognize that stablecoins are an emerging technology, and that policymakers must carefully consider how this fits into their financial system policies," Disparte said in a statement Thursday. "However, we believe that it is important to regulate activities and not technologies, allowing for responsible innovation to flourish.”

ADVERTISEMENT

Libra’s complex structure and massive scale will likely be subject to a vast array of banking, securities, money laundering and illicit finance laws enforced by close to a dozen agencies and departments. And even industry-friendly lawmakers and regulators have expressed alarm about the potential financial impact of a project already primed with over 2 billion potential customers.

David Marcus, who heads Facebook's involvement in the project, told reporters earlier this year that it strongly opposes defining the Libra as a security. 

"We strongly believe it’s [not a security] and we have good legal opinion that confirms in the view of the outside counsels we’ve ... consulted," Marcus said.

The Libra project is still in its very early stages. Facebook released a white paper laying out its vision over the summer, and the 21 initial members of the Libra Association signed on to its charter last month. When Facebook CEO Mark ZuckerbergMark Elliot ZuckerbergTech finds surprise ally in Trump amid high-stakes tax fight FTC rules Cambridge Analytica engaged in 'deceptive practices' with Facebook data mining Hillicon Valley: Trump officials propose retaliatory tariffs over French digital tax | FBI classifies FaceApp as threat | Twitter revamps policies to comply with privacy laws | Zuckerberg defends political ads policy MORE testified before the House Financial Services Committee about the project in October, he emphasized there are still many unresolved questions around what the coin could look like by the time it is launched.

“I actually don’t know if Libra is going to work,” Zuckerberg said.

Updated at 7:27 p.m.