It's not just regulators and lawmakers who have a problem with Facebook’s upcoming digital token Libra. At least one professors does.
Chris Brummer, a law professor at Georgetown University, the faculty director of the Institute of International Economic Law and a fintech pundit, testified in front of the House Financial Services Committee earlier this month and raised a lot of issues with the white paper Facebook released for Libra, its cryptocurrency.
In his testimony, which was covered by the media, the professor said the white paper on Libra fails to warn potential holders they could lose money and that the Libra Association, the group set up to promote use cases for the digital token, could run out of coins. Nor did the white paper inform Libra holders that they could be exposed to risk from mismanagement. It also doesn’t include anything about the impact of decisions made by the Libra Association and what it could do to the value of Libra coins.
In his testimony, Brummer argued that white papers have morphed into documents that often mislead and make false claims rather than inform the public about a new product or technology development. White papers “have emerged as a common tool through which digital asset companies communicate with potential consumers and investors about new projects and ventures. However, white papers have faced mounting criticism — for their hyperbolic language, false promises, and omissions of material information consumers would need before purchasing a digital asset,” the professor said in written and oral testimony.
He pointed to the Libra white paper, saying it made big promises but was scant on details. “The white paper is…intended to condition the market for the adoption of a product that Facebook wishes to sell to billions of people around the world. The lapses are all the more problematic given the securities-like features of Libra coins and possible implication of U.S. securities laws.”
Facebook unveiled its cryptocurrency plans in a white paper last month and since then it has received scathing criticism. Regulators, lawmakers and industry watchers concerned about the notion of Facebook controlling a form of currency have called for hearings and suspension of the project. If Facebook can’t protect its social media customers’ privacy how is it going to protect a digital currency, the argument goes.
Five lawmakers, concerned about the project, took the step last month to call on the social media giant to halt development of the token until hearings can be held. In a letter to the top executives at the social media giant, the politicians said Facebook’s crypto efforts raise serious concerns about privacy, trading and national security. "We write to request that Facebook and its partners immediately agree to a moratorium on any movement forward on Libra - its proposed cryptocurrency and Calibra - its proposed digital wallet," the lawmakers led by Maxine Walters, chair of the House Financial Services Committee wrote. "It appears that these products may lend themselves to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar." Since then hearings have begun with Brummer testifying on July 17.