This article comes fromMorningstar, by Dave Michaels Lalita Clozel
Odaily Translator |
Odaily Translator |
U.S. securities regulators are assessing whether Facebook Inc.s planned cryptocurrency Libra should come under their watch, a development that could further complicate Libra, which faces criticism from President Trump and members of Congress .
Staff at the U.S. Securities and Exchange Commission (SEC) are studying whether Libras structure effectively makes it an exchange-traded fund, or ETF, people familiar with the matter said. If the SEC decides that Libra is designed to qualify as an ETF, Facebook will need the SECs approval to launch the project.
Facebook has also met with the SEC, in addition to other regulators such as the Federal Reserve System, or the U.S. central bank system. On July 17, David Marcus, head of Facebooks blockchain, will explain the Libra project in front of members of the Senate, and regulatory issues related to Libra may emerge one by one. A Facebook spokesman declined to comment, and a spokesman for the SEC did not respond to a request for comment.
“They don’t seem to take into account the regulatory implications of how money will flow from users, wallets, and developers to/from trusts, or how the system works,” said Jonah Crane, a former senior U.S. Treasury official. , it (Libra) raises issues similar to those the SEC is investigating. Crane is advising fintech companies on regulatory compliance.
So far, regulators believe Facebook hasn’t provided enough detail on Libra’s technical aspects, such as how it will protect against money laundering and how much power other companies, including PayPal Holdings Inc. , will exercise, the people said. of control. Facebook has had more meetings with regulators in recent weeks, including a June 27 contact with the U.S. Treasury Department, according to its disclosure. The meeting was attended by Treasury Undersecretary for Terrorism and Financial Intelligence Sigal Mandelker, as well as officials from the SEC and the Federal Deposit Insurance Corp., the people said. (Note: The U.S. Federal Deposit Insurance Corporation is a company established by the U.S. federal government during the Great Depression to provide insurance for commercial bank savings customers and is a government agency.)
The Federal Reserve is also very interested in Libra, because Facebook has 1.56 billion daily active users, which makes Libra likely to be widely adopted. Federal Reserve Vice Chairman Randal Quarles said Thursday that while crypto assets are currently not big enough to raise concerns about financial stability, Facebooks involvement could change that. A spokesperson confirmed that the Financial Stability Board, an international regulator currently led by Quarles, has formed a Libra working group.
Not even U.S. President Donald Trump can ignore Libras influence. He tweeted Thursday that Facebooks Libra cryptocurrency has little stature or credibility. If Facebook and others want to become a bank, they must seek new bank charters and comply with all banking regulations, domestic and international, like other banks. Among other things, he claimed that unregulated crypto assets can facilitate illegal behavior, including drug dealing and other illicit activities.
Facebook has said it plans to consult with regulators in order to launch Libra in the United States and globally. Although the company had met with some regulators before announcing the project last month, it was careful to keep it as secret as possible. Facebook also contacted some think tanks at the time, asking if they would like to know about an unnamed project, and asked them to sign a non-disclosure agreement to learn more about the project details. Facebook declined to comment.
Libra may be regulated by multiple U.S. agencies. The SEC will play a key role if officials decide it is in fact an ETF. Dave Nadig, managing director of ETF.com, said that in a white paper published last month, Facebook described Libras operating mechanism in a way similar to ETF operations. In an article, he compared it to the WisdomTree Emerging Currency Strategy Fund, an ETF that holds a basket of global currencies.
Facebook has said Libra will be backed by a reserve of real assets, including bank deposits and government bonds denominated in different currencies. Facebook said in the white paper that Libra will use third-party authorized resellers (authorized resellers) to align the value of Libra with the reserve assets. With ETFs, large securities dealers known as authorized participants play a similar role: by buying and selling large numbers of shares directly with the fund, the funds market price approximates the value of the securities it holds.
Regulators will always look at the structure of what they currently regulate, and if a new vehicle is proposed, the regulator will look at whether it fits or looks similar to what it currently regulates, said Bibb Strench, an expert on ETF regulation at law firm Thompson Hine. .”
