Facebuck: The Political Economy of the Libra ‘Stablecoin’
From a long-range perspective, private money is not a new phenomenon. Meaningful precedents include commercial bills of exchange controlled by financiers during the Renaissance and money minted by the English East India Company as a nonstate quasi-authority. In the digital age, the proliferation of FinTech —an innovation of the “Fourth Industrial Revolution”— has encouraged private firms to launch their own cybercurrencies. Furthermore, the possibility of supranational money has been proposed more than once, but none of these plans has taken off. In the deliberations under the umbrella of the Bretton Woods conference, British economist John Maynard Keynes suggested the creation of ‘bancor’ as a gold-backed monetary invention designed to diminish the risks of competitive devaluations and wild fluctuations in exchange rates. Such problems threatened both global macroeconomic stability and world peace. Despite its theoretical advantages for the preservation of financial, monetary and strategic stability, the United States rejected bancor because it was preferable for American national interests to ensure the dollar’s dominance as hegemonic reserve currency. On the other hand, in the 60s, the International Monetary Fund (IMF) formulated the Special Drawing Rights (SDRs) as an artificial multilateral concoction that would operate as internal unit of account and reserve asset. Since the value of the SDRs is supported by a plural integrative basket of hard currencies, the SDRs can hypothetically act as stable money on a global scale. Yet, their monetisation remains negligible because they still cannot be used in private cross-border financial and commercial transactions.
In 2019, a corporate consortium headed by Facebook —later rebranded as Meta— announced the development of the most ambitious digital currency project ever conceived. The project was called “Libra” as a reference to both an astrological sign that evokes the aspiration for balance and an ancient unit of measurement used in the Roman Empire to mint coins. Until then, Libra had been drafted under strict conditions of secrecy. As a supranational, private and virtual monetary unit, Libra was envisaged as a natural and upgraded version of its forerunners. However, its existential horizon intended to go much further. In fact, Libra’s original white paper promised no less than the reinvention of money. As an evolutionary offshoot derived from the second generation of digital currencies, Libra was built to overcome the structural volatility of preceding cryptocurrencies —like Bitcoin and its spinoffs— most of which behave as speculative assets. The value of Libra would be anchored to a basket of holdings denominated in hard currencies issued by Western or Western-leaning states, such as the US dollar, the euro, the Japanese yen, the pound sterling, and the Singaporean dollar. The infrastructure of the Libra ecosystem comprised a wallet called “Calibra,” conceived as a digital gateway to a myriad of various financial services. Ideologically, Libra was underpinned by the worldviews of philosophies like neoclassical free market economics, cosmopolitan globalism, a messianic belief in the algorithmic power of dataism, and techno-utopianism.
Unlike the decentralised environments of unofficial cybercurrencies, Libra’s vertical governance structure would be run by hierarchical nerve centers. Specifically, the corporate coalition responsible for masterminding Libra included companies from sectors like advanced technologies, financial services, venture capital and telecom. In a way similar to a currency board, such an entity would be the ultimate holder of the Libra ecosystem’s administrative privileges. Considering the combined market power of its elite members (Facebook plus an accompanying constellation of firms like Booking, Mastercard, PayPal, Spotify, Uber, Visa and Vodafone) this cabal could be regarded as an “oligarchical plutocracy.” Based on their position as facilitators of transnational economic exchanges, catalysts of complex interdependence and pivots of digital interconnectedness through overlapping userbases, the project had a tremendous potential for international projection. Tellingly, the headquarters of the Libra Association would be in Geneva, Switzerland. Such a hub was chosen for its world-class financial prestige, benevolent tax regime, status as a cradle of entrepreneurial cryptocurrency startups, qualified workforce, role as host of multilateral organizations, political stability, and tradition of diplomatic neutrality.
Facebook, one of the leading Silicon Valley crown jewels, was at the forefront of this project. With a userbase of around 2.4 billion people and a market capitalization superior to the GDPs of economies like the Netherlands, Turkey or Saudi Arabia, this company is in charge of the world’s largest social media platform. With the rollout of Libra as a disruptive spearhead, Facebook intended to strengthen its oligopolistic power through its incursion into finance. The cornerstone of Facebook’s business model is to pervasively data mine and harvest all sorts of personal information about the users of its virtual ecosystems in order to target consumers with specific ads and gather actionable market intelligence. Through the intensive monetization of its nearly bottomless supply of informational commodities, via AI-driven cross-referencing systems, this company embodies the zeitgeist of the so-called “information age.” Mark Zuckerberg has claimed that thanks to its sophisticated capabilities, Facebook is more like a government than a traditional company. This resemblance is reflected in shared common denominators like policies, official identitarian symbols, specialized bureaucracies, hierarchies, public services, and the management of large communities.
Ultimately, the Libra project ended up as a fateful miscarriage provoked by the outspoken bipartisan objections of the US political class across the spectrum. The upgrades and adjustments proposed by its creators did not suffice to convincingly overcome this dooming rejection. However, the story of the digital currency is worth examining, not just as a subject matter for economic history buffs. Considering the incremental power of high-tech firms, the growing oligopolization of digital markets, the rise of FinTech breakthroughs, the increasing complexity of economic statecraft, the emergence of unconventional arenas of strategic competition, the proliferation of monetary pluralism and an ongoing transition towards multipolarity, the analysis of Libra offers instructive lessons for strategic foresight, security, foreign policy and intelligence.
Libra’s Implications for National Power
Far from pointing in a uniform direction, Libra’s ramifications for national power were contradictory. As a digital currency designed by an American company —headquartered in Silicon Valley and led by US executives— Libra could have been theoretically leveraged as an asset of US economic statecraft in three different ways:
- An enhanced worldwide collection of financial intelligence (FININT), particularly considering Facebook’s connections to entities from the American intelligence community, including the National Security Agency (NSA). In an attempt to showcase its political commitment, the Libra Association hired former senior government officials with backgrounds related to FININT for top directive positions.
- Its role as a monetary pseudopod or proxy of the US dollar hegemony. Rather than as an alternative, Libra was conceived as a derivative that would supplement the greenback and its involvement in international economic exchanges. The design of Diem, the project’s reengineered version, was more directly subordinated to the USD and its governance structure. Accordingly, the implementation of the project would have strengthened American control of international finance, as well as Washington’s ability to implement coercive sanctions as an instrument of foreign policy. To further emphasize this commitment, the prospective headquarters would be based on US soil instead of Switzerland, as originally contemplated. David Marcus, an architect of the project and head of Calibra, promised a full-fledged alignment with US national security policies and regulations.
- Its contribution to reposition the United States in the race for FinTech superiority. With Libra as a flagship, Facebook intended to shape the ongoing planetary transition toward cashless economies in accordance with US national interests. As a transformative innovation driven by an American entrepreneurial spirit, Libra had the potential to be harnessed as a symbolic vector for the projection of US soft power on a global scale. In order to get the Libra scheme greenlighted, Zuckerberg presented his company as a loyal US national champion.
Moreover, not everyone in the Beltway bought the aphorism that what is good for Facebook is good for the United States. In fact, members of the Trump administration and Democratic legislators seemingly believed that Libra’s drawbacks were superior to its benefits. Libra —as a surrogate of a corporate coalition under Swiss jurisdiction— was seen as an outright threat for the Westphalian monetary monopoly held by the state as an expression of sovereignty. The US Congress even warned about the risks of a “new Swiss-based financial system that is too big to fail.” The resulting degradation of such attribution would lead to the unchecked empowerment of Facebook and its CEO. The Congressional Research Service indicated that the systemwide circulation of stablecoins like Libra could undermine the Fed’s operational ability to implement monetary policy and weaken the grip over international financial and monetary circuits held by the United States since the second half of the 20th century. According to senior powerbrokers of the US political establishment and commentators, Facebook needs to be regarded as an imperial great power ruling over a network of virtual nations. Texas Congresswoman Sylvia Garcia reminded Zuckerberg that “he’s not a country on his own.” Preston Byrne, a cryptocurrency lawyer, stated that “if Facebook raised an army, this would be only slightly more hostile to the people of the United States than what is currently proposed.”
Admittedly, some of this opposition was likely motivated by the reluctance of Wall Street to welcome a game-changing source of unwanted competition, but the consensus also clarified that —from the perspective of US national interests— a digital version of the dollar was preferable. Despite lobbying, PR campaigns and even the downsizing of the project, this backlash sank Libra before it even sailed. Under pressure, former members of the Libra Association decided to defect and Zuckerberg —increasingly cornered— had no choice but to acknowledge its “risky” nature. The leftovers of the project’s residual skeleton were basically sold as scrap. Despite its advantages, Libra was not good enough to be fully compatible with the imperatives of US economic statecraft.
For the national power of developing states, Libra was far more problematic. Although justified as helpful for millions of unbanked and underbanked people, Libra would have been harmful for emerging economies with weak currencies. In these cases, Libra would have fueled the predatory marginalization of the official currency, the erosion of monetary sovereignty, the hostile takeover of money by a private entity, and the exacerbation of financial instability, as well as the capture of their FinTech markets and banking systems. For much of the Global South, embracing the private stablecoin would mean counterproductive outcomes. These would include the subordination of their economies by foreign corporate overlords, as well as a high degree of direct exposure to systemic volatility. With a currency in the hands of a company largely indifferent to their interests, their macroeconomic performance would be held hostage by the asymmetric power of the Libra Association.
The Prospective Involvement of Libra in Geoeconomic Rivalries
In a strategic context in which both state and nonstate actors can wage economic warfare, Libra may have been weaponized by Facebook, either autonomously on its own or under Washington’s direction. As Ian Bremmer noted, high-tech companies are positioned as “foot soldiers in a conflict between hostile counties.” Through the control of its basket of supporting assets, Libra could be instrumental in the manipulation of exchange rates. With such potential offensive ability, Libra would have been useful to target even hard currencies with the threat of major disruption. The rollout of Libra would have meant “an opening salvo by a US corporate power” in the chessboard of today’s currency wars. In turn, the financial infrastructure of the Libra environment may have been involved in the enforcement of economic sanctions. The exclusion of entire economies in which Libra usage has reached systemic proportions would unleash economic turmoil and maybe even political unrest. Moreover, the transnational circulation of Libra would bring opportunities to interfere in contexts of political crises and power struggles by funding —with little governmental oversight— foreign groups aligned with the Association’s corporate agenda. In addition, the international rollout of Libra would mean its involvement in the ongoing strategic rivalry for the conquest of FinTech markets in the Global South, especially considering its attractiveness for large sectors of users with limited access to conventional financial services. In these countries, the circulation of Libra would have performed as a competitive American commercial counterweight against the growing internationalization of Chinese financial and monetary arteries linked to the yuan (CNY).
Zuckerberg himself has framed Facebook’s projects in a backdrop of an ongoing sophisticated arms race shaped by great power strategic rivalries. Morgan Beller, a former high-ranking Facebook executive stated that the project was designed as a response to confront China. Beller even claims that the impetus behind the inception of Libra was partially fueled by a determination to keep in check the growing geopolitical influence of China and to prevent Beijing from achieving supremacy in the foreseeable worldwide transition towards digital currencies. Andy Barr, a Republican Kentucky Congressman and one of the few American politicians that endorsed Libra, stated that “the fact that Facebook is launching into competition with China is positive for US national security”. Kathryn Haun, member of the Libra Association’s executive board on behalf of venture capital firm Andreessen Horowitz, warned that “every day that passes, it gets harder and harder for Western-backed projects to keep up.”
On the other hand, the reactions of powerful states with diverging geopolitical orientations highlight an adversarial view of Libra. As an emerging peer competitor of the US in fields like finance, technology, and cyberspace, China regards Facebook as a formidable rival with close ties to the forces which undergird the American ‘deep state.’ Facebook’s presence in mainland China is even kept at arm’s length by the Great Firewall of China. In this respect, Libra represented unwanted competition for the Chinese leading edge in the FinTech realm, an unwelcome attempt to catch up with WeChat and Alipay, a covert vehicle for hostile intelligence gathering, and an obstacle for the long march of RMB internationalization. The deliberate exclusion of the renminbi from Libra’s currency panel —a political decision— further exacerbated the Middle Kingdom’s anxieties. The US Senate even demanded its permanent ban. Even if Libra did not take off, Beijing was troubled by the latent concept of a Western supranational stablecoin. In response, as Professors Gal Luft and Anne Korin noted, the announcement of Libra accelerated Beijing’s plans to launch the e-yuan (e-CNY) as a major Central Bank Digital Currency (CBDC).
France —a core EU member, a key NATO partner and a state that strongly distrusts the ‘exorbitant privileges’ that come with dollar hegemony— did not conceal its opposition. The French Finance Minister Bruno LeMaire, in a report commissioned by the French Senate and French think tanks, stated that the project was unacceptable for Paris’ national interests. This shared perception was a result of concerns over prospects of a global privatization of money, financial systemic disruptions, threats for monetary sovereignty, unforeseen risks, and even the asymmetric subordination of the French state by the foreign oligopolistic power of Silicon Valley (GAFAM: Google, Apple, Facebook, Amazon, Microsoft). For French economic statecraft, the deployment of Libra would have represented a strategic setback. To a certain extent, this staunch skepticism was mirrored in Germany, the other twin pillar of the EU. Then German Finance Minister Olaf Scholz characterized Facebook’s currency plans as a “wolf in sheep’s clothing.” Both Paris and Berlin favored the development of European countermeasures.
Libra could have become a center of gravity worth targeting —through cyberwarfare, speculative trading and even infiltration and sabotage— by hostile forces for strategic purposes. These attacks would be executed stealthily through secretive conduits like hedge funds, sovereign wealth funds, intelligence tradecraft, and offshore finance. This possibility would have been attractive for states which seek to contest US financial and monetary hegemony.
Libra as a Hypothetical Hegemonic Watershed
The previous contents suggest that supranational stablecoins like Libra may have altered the balance of power and the distributive structure of polarity within the international system. A private digital currency that achieves a significant degree of international projection in cross-border economic exchanges can develop the critical mass that would be needed to reach a major reserve currency status. This potential is determined by the volume of its prospective circulation, the underlying support of hard assets which back its value, and the combined market power of heavyweight transnational companies.
Moreover, the successful worldwide proliferation of a currency like Libra had the potential to position its corporate master as a nonstate superpower, especially in an increasingly polycentric world order. As the issuer and controller of a major reserve currency, Facebook would have gained a seat at the table in the concert of great powers. As the rewriter of the world’s financial and monetary order, many states would have no choice but to comply with the policies implemented by the Libra Association. Although states are reluctant to welcome private companies in the game of high politics, the challenging assertive rise of these nonstate entities and their unprecedented influence may reshuffle the correlation of geopolitical forces on a global scale.
Finally, the conceptual blueprint of Libra as a supranational crypto-asset can theoretically inspire the development of a synthetic hegemonic currency, as noted by Bank of England Governor Mark Carney. Such a proposal responds to the context of flourishing multilateral deliberations about the structural renewal of the global financial and monetary system. Said formula might represent a consensual solution for growing strategic competition in the monetary sphere. In hindsight, this possibility might be perhaps the most significant legacy of the Libra project. Paradoxically, despite its premature burial, Libra can still transcend beyond its ephemeral lifespan.
Lessons Learned from Libra
Together, these analytical insights can be extrapolated to approach future corporate supranational stablecoins that share similar characteristics —especially in terms of volume and potential for systemic international projection— with Libra. Such an assessment illustrates that private currencies developed by transnational firms from strategic sectors may have far-reaching geopolitical ramifications. Therefore, it is pertinent to rethink and recalibrate the larger significance of corporate digital money for unconventional FinTech battlespaces. It would be unwise to dismiss its relevance only because it is not directly under the full control of a state.
The demise of Libra does not preclude the eventual success of a similar formula based on a hybrid model of private-public partnerships. In other words, Libra is not a dead end in the evolutionary trajectory of supranational corporate stablecoins. Companies from strategic sectors and the governments of great powers can join forces in the R&D of monetary innovations which are suitable for internationalization. In an age of increasing pluralism in monetary matters, they can co-exist with official CBDCs and unofficial cryptocurrencies or even operate as complements. In sum, the rise and fall of Libra is a saga which teaches enlightening lessons about the present and future of high-tech mercantile realism.
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