In one of the wildest twists to the cryptocurrency and blockchain industry, the House Financial Services Committee held a hearing with Mark Zuckerberg, CEO of Facebook, to ask questions about the Libra Association and the company’s foray into digital money. While many questions at the hearing went predictably to Facebook’s ad revenue process, censorship practices on posts, its reputation on data and impacts of foreign adversaries using the platform to influence the 2016 Presidential election, a nuanced policy result entered into the debate.
A bill titled “Stablecoins Are Securities Act of 2019”, discussed how managed stablecoins should be treated as securities under the SEC. It was over five years ago when U.S. Senator Joe Manchin (D-W.Va.) called on U.S. regulators to ban bitcoin. In the July hearing, Congressman Warren Davidson (R-OH) created a great deal of excitement in the cryptocurrency space when he stated, “There’s Bitcoin and Then There’s Shitcoin (Libra).”
Indeed, Congress has come a long way in being able to decipher between different blockchains, including a much more decentralized Bitcoin blockchain model operating since 2009, against what starts out as a more centralized approach with Libra. The Ranking Member of the House Financial Services Committee, Patrick McHenry (R-NC), noted on a recent podcast with Laura Shin called “Unconfirmed” that “Bitcoin will be of enormous value”.
It is clear that while Congress was originally very explicit to the point that many who discussed policy on the subject of cryptocurrency with Congress would avoid using bitcoin and go through great pains to separate bitcoin the cryptocurrency from blockchain the technology.
Indeed, the fluctuations in prices for cryptocurrencies painted a picture similar to the “Wild West” that caused a great deal of unease as the public started to profit in 2017 with a boom in prices, followed by a bust that left many disgruntled. As companies continued to see potential value in these new types of digital coins, soon the idea of finding a way to create stability by backing them with FIAT currencies on a 1-to-1 basis became extremely popular.
Companies in the industry space such as Tether queued the banks to look at this stable phenomenon, as JPMorgan Coin was introduced. Soon, it’s very likely Facebook got the memo and realized the creation of a cryptocurrency was a worthwhile endeavor for enabling global payments on a mass scale if the price could remain “stable”.
In a response similar to the idea of simply banning Bitcoin in 2014, many in Congress see Libra as an impending threat to the U.S. dollar and that, while Bitcoin likely cannot be banned in the U.S. as has recently been mentioned, perhaps Libra could be stopped through legislation. Indeed, the worst case outcome for any of the cryptocurrencies established on blockchains would be to receive the treatment as a security. This is the death knell for most companies as needing broker-dealers to facilitate transactions on digital tokens that are not truly “equities” means business cannot exist or scale in any meaningful way.
So, for a bill that is described as “Stablecoins Are Securities Act of 2019”, the problem of course is how broad of a definition this implies. As the bill refers to “managed stablecoins”, perhaps the “basket of currencies” that Libra was originally thinking of to create stability might shift to different iterations backed directly by a FIAT currency, to avoid the “security” label.
Of course, this still indicates that, from a policy perspective, while no bill has been introduced to ban Bitcoin, no one ever expected the introduction of Libra would result in additional scrutiny for cryptocurrencies providing stability in value. Thus, while bitcoin’s virtues of decentralization are being extolled in comparison to other cryptocurrencies, it seems that the bigger threat to the status quo is not decentralization through blockchain technology, but rather the mass distribution of digital carbon copies of tokens that provide a derivative of a fiat currency.
Author: Jason Brett
Source: Forbes: “Stablecoins Are The New Bitcoin” In Congress