Facebook’s Libra Should Be Regulated Like a Security, Says Former CFTC Chair

Libra is a security, says a former Commodity Futures Trading Commission (CFTC) chairman in prepared remarks to the U.S. House of Representatives.

Gary Gensler, who chaired the CFTC from 2009 to 2014 and previously held leadership roles at the U.S. Treasury Department, says in written testimony that Facebook’s new cryptocurrency project looks like an investment vehicle and that Libra may even resemble some banking structures.

Gensler will testify before the House Financial Services Committee on Wednesday, as part of a panel of expert witnesses on the potential implications of Libra. He will join Public Citizen president Robert Weissman, Columbia University law professor Katharina Pistor and Georgetown University law professor Chris Brummer.

In Gensler’s remarks, obtained by CoinDesk, he describes how the Libra cryptocurrency might be classified as a security.

At the heart of his argument is Libra’s structure: Libra itself is intended to act as a kind of stablecoin, with its value pegged to a basket of sovereign currencies and government bonds. Members of the Libra Association, the governing council charged with overseeing the cryptocurrency’s ongoing development after it launches, will receive a Libra investment token – a security token, as Facebook has acknowledged.

Collateral earned on the basket of currencies backing Libra (referred to as the Libra Reserve) will go to holders of the investment token, according to documentation Facebook published about the project last month.

Gensler argues this means Libra itself looks like a security, saying:

“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.”

‘Pooled investment vehicle’

According to Gensler, Libra is a security for the same reasons that the Libra Investment Token is a security.

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