In the wake of the recent controversy surrounding the proposed Libra cryptocurrency, two members of Congress have begun circulating draft bills that would tighten federal regulation of certain stablecoins.
The first bill, entitled the “Stablecoins are Securities Act of 2019,” is sponsored by Rep. Sylvia Garcia (D-TX). Under the bill, so-called “managed stablecoins” would conclusively be deemed securities for purposes of the federal securities laws. A “managed stablecoin” is defined to include any digital asset that is not registered under the federal statute regulating mutual funds and exchange-traded funds, and that also satisfies one or more of the following tests:
- the market value of such digital asset is determined, in whole or in significant part, directly or indirectly, by reference to the value of a pool or basket of assets, including digital assets, held, designated or managed by one or more persons; or
- one or more holders of such digital asset, directly or indirectly, are entitled to obtain consideration or other assets, including other digital assets and any sovereign currency of a foreign government or the United States, in exchange for the digital asset, the amount of which payment is determined, in whole or in significant part, directly or indirectly, on the basis of the value of a pool or basket of assets, including digital assets, held, designated or managed by one or more persons.
The second bill is sponsored by Del. Michael San Nicolas (D-Guam) and is currently untitled. It would require the Securities and Exchange Commission to, by rule, direct the national securities exchanges to prohibit the listing of a security of any issuer of securities if the issuer, a director of the issuer or an executive officer of the issuer, after the date of the registration of such security, received compensation in the form of a managed stablecoin; bought or sold a managed stablecoin; or was otherwise affiliated with a person who bought or sold a managed stablecoin after the date of the registration of the security. Read literally, this bill would have the draconian effect of requiring an exchange to delist the securities of any public company whose executives hold managed stablecoins in their personal investment portfolios, even if the holding is wholly unrelated to their employment or professional activities, and even if the holding period predated their current employment.
Again, both bills are currently in draft form and do not appear to have yet been formally introduced, so it is difficult to predict their trajectories. But they further underscore the growing frustration in Congress of the evolution of the crypto marketplace.