Bipartisan Bill is Bad News for Facebook

This week, a bipartisan group of senators introduced a bill, titled “Managed Stablecoins are Securities Act of 2019,” targeting Facebook’s cryptocurrency, Libra. The bill would classify Libra as a security, encouraging increased regulation and scrutiny for the cryptocurrency.

Facebook has routinely insisted that Libra is closer in relation to PayPal, as a digital payment system, than a security. In July, 2019, Facebook’s crypto chief, David Marcus, attended a House Financial Services Committee hearing relating to the Libra currency. Marcus was repeatedly asked whether Libra was closer to a bank or an app similar to Venmo.

A statement from Representative Ed Perlmutter, a democrat from Colorado, emphasized the Committee’s main concern:

“We all have this same question for you and that’s the resistance you’re feeling because we think you’re a bank, but you’re not quite like a bank,” Perlmutter said. “And if you’re a bank, we regulate the heck out of you because we’ve seen a lot of people lose money where there hasn’t been regulation. So that’s the resistance that I feel, I want to support your innovation I want to support the efficiency that you people believe you’re bringing to the table. But I also don’t want anybody getting hurt here.”

What does all of this mean for the future of Libra? Zuckerberg has gone on record stating that “Facebook will not be part of launching the Libra payment system anywhere in the world until U.S. regulators approve.” At worst, Facebook may have to abandon its own cryptocurrency project. At best, Libra will continue to be heavily scrutinized by U.S. lawmakers, whether as a security or a digital payment system.