Libra is still a security despite its revamp, says Congresswoman

Following the release of a revised whitepaper for Facebook-backed cryptocurrency Libra, US Rep. Sylvia Garcia (D-Texas) has published a statement vowing to ensure that the SEC regulates it as a security.

Libra has announced that instead of being backed by a basket of fiat currencies, the cryptocurrency will now be backed by individual stablecoins pegged to specific fiat currencies, with smart contracts linking its price to the combination of stablecoins.

Commenting on this development, Garcia noted that Facebook and the Libra Association’s second whitepaper “retains a Libra coin backed by a basket of assets,” and thus doesn’t address concerns she had previously raised.

“Facebook and the Libra Association had an opportunity to address the concerns I and my other colleagues raised with their initial whitepaper. Unfortunately they chose not to listen to the bipartisan concerns raised about Libra,” Garcia wrote, adding that she “will continue to work to make sure that the SEC regulates any such asset as the security that it is under current securities laws.”

Unanswered questions

According to Garcia, there are “simply too many questions left unanswered regarding why Facebook is even developing a cryptocurrency.” Furthermore, she noted, it’s impossible to predict how Libra could affect the global economy and consumers.

“From the moment Facebook and the Libra Association released its first whitepaper on its new Libra currency, I have made it clear that I have major concerns about the project and its proposed rollout,” Garcia wrote.

Last November, Garcia, who is also a member of the US House Committee on Financial Services, introduced a bipartisan bill titled “Managed Stablecoins Are Securities Act of 2019.” The document insisted that managed stablecoins such as Libra are “clearly securities under existing law.”

At the time, Garcia claimed that her proposed legislation “simply clarifies the statute to remove any ambiguity” from the regulatory structure of digital assets to “protect consumers and ensure proper government oversight.”

Libra has struggled to find favor with regulators and governments, with politicians and banks voicing concerns over the cryptocurrency’s reach and potential impact on national economies. Since it was first announced, Facebook CEO Mark Zuckerberg has been hauled before Congress to defend Libra, while Libra Association members Vodafone, Stripe, eBay, Mastercard and Visa have quit the project. Libra plans to launch in the second half of the year, but with the addition of stablecoins, it’s a very different project from what was initially proposed.