David Marcus, vice president of messaging products at Facebook, was the one in firing line as US congressmen and congresswomen voiced their concerns towards the platform's proposed digital currency Libra.
Himes has not been the only one to make the comparison. In June, Calibra, the subsidiary of social networking giant Facebook, released its white paper for its plans to launch the cryptocurrency named Libra as well as the financial structure of the coin.
Libra is physically backed, one-for-one, by the US dollar which is kept in a reserve. The deposited fiat money is invested in low risk assets and other foreign currencies to maintain Libra’s stability.
The assets in Libra’s reserve will yield some returns, however, the holder of Libra won’t see any of it. In fact, it will go into supporting operating expenses with any leftovers going to those who help fund the launch of the digital currency.
Despite holders of Libra not being able to gain an income from the cryptocurrency, it is still backed by a basket of assets and can fluctuate in value. These are some of the features that many have likened to an ETF.
Townsend Lansing, chief commercial officer at TokenMarket, commented on this allegations saying, “if you are a hammer, then everything looks like a nail. And if you work in the ETF world, then well, the same”. Lansing published an article on ETF Stream insisting on people to stop calling Libra an ETF.
At Marcus's meeting with the congress, Himes comments: “You have said [Libra's] not an ETF. I am a former banker, this to me looks exactly like an ETF backed by a series of short-term instruments and foreign currencies. It even has a creation and remittance mechanism.
“Please elaborate for me why this is not an ETF."
Marcus agrees Libra is used as an operational mechanism which is similar but remains adamant "Libra is a payment tool”.
Himes replies: "The SEC doesn’t say if you’re a payment tool, you’re not an ETF. It says if you have a security which is backed by other securities, then you are an ETF.
"You may quibble with me that you are not a security but you are most certainly backed by other securities."
Marcus defends Libra payment tool structure by saying the reserve is mainly invested in other currencies.
“No one would buy Libra as an investment as it is designed for stability”, says Marcus.
“When you look at the definition of securities by the SEC, it actually says you are investing for a profit from the management of the product. And this product is not an [investment] product, it is a payment tool and it is not going to be managed."
Despite Himes’ confidence Libra is structured like an ETF, Marcus closes the discussion by saying “you can’t use ETFs for payments, whereas Libra is used specifically as a payment tool”.
Before his allocated five minutes ran out, Himes also shared his concern about holders of Libra unknowingly being exposed to foreign exchange risk.
Someone using Libra to pay their rent one month could face having to pay more if the value of the digital coin was to fall between payments and this is a flaw which additionally needs to be addressed by Facebook and Calibra.