Libra: A Sovereign Currency for Cyberspace?

Face­book, unar­gu­ably one of the biggest over­lords of cyber­space, has pro­posed a crypto­cur­rency: Libra.

That’s inter­est­ing. Why Face­book? What’s happening?

As cyber­space became more and more pop­u­lous, the ques­tion arose who is best equipped to reg­u­late things there. That’s an issue because the tra­di­tion­al reg­u­lat­ors of the phys­ic­al world – states – are lame ducks in cyber­space. The strong arm of the state doesn’t extend to vir­tu­al ter­rit­ory. As a con­sequence, any reg­u­la­tion of beha­viour in cyber­space by states is but indir­ect, via state ter­rit­ory, as always.

In cyber­space, not states but its strongest inhab­it­ants – Face­book, Google and the like – impose dir­ect reg­u­la­tions, at least over the vast cyber ter­rit­ory which they dom­in­ate. This exer­cise of power didn’t con­vert these inhab­it­ants to gov­ern­ments in the tra­di­tion­al sense, but for want of state power in cyber­space it did turn them into some kind of rul­ing class.

Now, the announce­ment of Libra.

Equilibrium

Before we for­get: the ori­gin­al libra was a pair of scales sus­pen­ded at equal dis­tances from a ful­crum. One scale would con­tain some­thing of unknown weight, so you would add known masses to the oth­er plate until you reach stat­ic equi­lib­ri­um and both scales level off. This would hap­pen when the masses on both scales are equal.

Will Libra be some­thing like that?

It’s not known where money comes from. It’s there or not there. Most of the time, it’s not there.

Kurt Tuchol­sky

Reactions

A few days after Facebook’s announce­ment, the US House of Rep­res­ent­at­ives Com­mit­tee on Fin­an­cial Ser­vices asked Face­book to put Libra on hold. The US Con­gress needed time, it said, to invest­ig­ate the pos­sible risks Libra posed to the glob­al fin­an­cial sys­tem and to the US dol­lar as the anchor cur­rency of the world.

There doesn’t seem to be an offi­cial state­ment from the European Uni­on or the Eurogroup yet, but Bruno Le Maire, the French min­is­ter of fin­ance, declared Libra must not become a sov­er­eign currency.

Sov­er­eign. Why would he say that? 

A Sovereign of Cyberspace?

His­tor­ic­ally, the right to issue and reg­u­late cur­rency, known as the right of coin­age, was one of the exclus­ive priv­ileges of a sov­er­eign, along with the right to impose and reg­u­late tar­iffs – or taxes. 

Is Face­book a sov­er­eign of cyber­space?

For sure it acts like one. Its announce­ment of Libra is a pretty sov­er­eign move.

At first glance, Libra comes along like yet anoth­er private crypto­cur­rency, sim­il­ar to Bit­coin, Eth­ereum or alt­coin. But unlike oth­er private cur­ren­cies, which do this out of neces­sity, Libra doesn’t tar­get but rel­at­ively few users. Rather, it’s designed to be a cur­rency for every­one. And unlike oth­er private cur­ren­cies, Libra won’t be decent­ral­ised. There’s a body called the Libra Asso­ci­ation to over­see it (in the leg­al form of a Swiss Ver­ein, thus not with­in imme­di­ate reach of US and EU reg­u­lat­ors). To over­see means the Libra Asso­ci­ation is to assume cent­ral bank func­tions. One of the func­tions of a cent­ral bank is to man­age money sup­ply, the total value of money avail­able in an eco­nomy at a spe­cif­ic time.

In oth­er words, in announ­cing it would issue and reg­u­late, through the Libra Asso­ci­ation, a cur­rency for cyber­space, Face­book claimed a priv­ilege which, his­tor­ic­ally, states (or their pre­curs­ors) have claimed as sovereigns.

Mak­ing news at the moment are the appre­hen­ded reper­cus­sions of this on cur­ren­cies in the phys­ic­al world. This seems to worry US Con­gress and some European fin­ance min­is­ters. But these reper­cus­sions aside – is Face­book attain­ing some kind of cyber state­hood here?

Cyber Statehood?

If Libra is suc­cess­ful, will Face­book come up with the idea of exer­cising more sov­er­eign rights? For example, the right to impose and reg­u­late tar­iffs? Or the right to impose taxes (pay­able, say, in Libra)?

How would we take that? Would we be alright with it? ‘Render unto Caesar the things that are Caesar’s’? Or would we exclaim ‘no tax­a­tion without representation’?