US Gov considers a bill classifying stablecoins as securities, possible reaction to Libra?

• The bill is published by Rep. Sylvia Garcia that seeks to provide clarity regarding the nature of stablecoins.
• The SEC will have authority over all stablecoins provided the bill is passed.  

The United States Congress will possibly consider a bill to classify stablecoins as securities considering that stablecoins increasing significantly. Large-scale projects like Facebook’s Libra are making efforts to bring stablecoins into the limelight. Stablecoins, as the name suggests, aims to be a more stable form of cryptocurrency. Their values are backed by a fiat currency or other asset that is more stable compared to other virtual currencies.

Rep. Sylvia Garcia (D-Texas) recently published a draft looking for clarity regarding the nature of stablecoins. Notably, the bill introduces legislation to the House Financial Services Committee to regulate stablecoins under the Securities Act of 1933.
In particular, the bill states:  

“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.”

The bill may be a retaliation to Facebook’s stablecoin the Libra, which has attracted attention from many politicians since the whitepaper was revealed in June of this year. The bill also states:

“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.”

The Securities and Exchange Commission (SEC) will have authority over all stablecoins provided the bill is passed and signed into law. This would be a crucial step to creating clarity regarding the digital asset as well as the future of Facebook’s Libra. However, it is not sure if the proposed rule will ever become law.