cryptoglobe.com
Gary Gensler, the former chairman of the United States (U.S.) Commodity Futures Trading Commission (CFTC), recently described Facebook’s forthcoming virtual currency, Libra, as comprising a security.
The former chairman advocated that the U.S. government subject Libra ton securities regulations, stating: “As currently proposed, the Libra Reserve, in essence, is a pooled investment vehicle that should at a minimum, be regulated by the Securities and Exchange Commission (SEC), with the Libra Association registering as an investment advisor.”
“It’s unambiguous that [the Libra Investment Token] is a security as it will receive a net return based upon interest on the Libra Reserve.”
Aspects of Libra's Structure May Fall Under Banking Regulation
Mr. Gensler, who chaired the CFTC from 2009 until 2014, and previously worked at the U.S. Treasury Department, expressed his views in a written testimony delivered to the U.S. House of Representatives. Gensler will testify before the House Financial Services Committee on the potential ramifications of Facebook’s virtual currency this week.
Mr. Gensler also asserted that “there is some basis to consider the Libra Reserve as a bank or to apply bank-like regulation to it,” arguing that the Libra’s Reserve seeks to circulate “a private form of money,” of which can be used to lend “the proceeds to banks (as deposits) and governments (as debt securities),” in addition to being used a means of payment.
“At a minimum, there should be restrictions on Libra Reserve’s investments and [a] prohibition on its ability to lend or operate as a fractional bank,” added Gensler.
In October 2018, Gensler also advocated the regulation of initial coin offerings (ICOs) as securities offerings, arguing in favor of a strong regulatory address designed to protect investors.
Treasury Department Official Demands Robust AML/CFT Safeguards for Libra
U.S. Treasury Secretary, Steve Mnuchin, has also recently emphasized the regulatory challenges posed by Libra, highlighting the need for robust safeguards designed to counter the financing of terrorism and money laundering activities. Speaking to the attendees of a White House press conference, Mnuchin stated:
“Treasury has been very clear to Facebook [...] and other providers of digital financial services that they must implement the same anti-money laundering safeguards in countering the financing of terrorism as traditional financial institutions," he stated.