Facebook, Google, Apple – all are seriously underplaying their political hands.
Case in point is Facebook’s Libra digital currency – a digital currency on the drawing board from Facebook and a coalition of 28 founding companies.
Make no mistake – the currency itself would be a game changer in terms of international commerce and micro-transactions. A second generation blockchain currency that takes the lessons of Bitcoin and brings the technology to the mainstream. It will literally change the way you buy things, the definition of international commerce, and the concept of sovereignty itself.
And why not a new digital currency that is free from bank control, national regulation and control by corrupt governments? One of the prime beneficiaries would be the 1.7 billion under-served customers in Africa and Asia who cannot access stable currency or transaction services. Some have suggested that Libra will have a stronger net positive effect on African financial systems than all financial aid currently being sent to the continent.
There is no doubt why the regulators of the current financial system have reared up in dread at Libra and other digital currency. A well implemented block-chain digital currency is a profound risk to the concept of ‘country’ or sovereign state as we know it.
A key definition of a sovereign state is the ability to regulate transactions, control currency, and tax either income (income tax) or expenditure (consumption tax). An alternative currency system places that very structure at risk.
And so, we hear that behind the scenes vast pressure is being placed on the founding supporters of Libra by the US Fed and IMF. Mastercard and Visa, Stripe, eBay and Paypal have withdrawn in recent weeks under intense pressure.
There are other open threats. A draft G7 report released this week, prepared jointly with the IMF, warns participants:
“The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed”. (* hint: this will never happen as by definition these new currencies are by design free from regulation and oversight).
And Donald Trump tweeted on 12 July that “If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations.”
In short, the plan is to delay, threaten, and attempt to control Libra and the tech giants that support it.
Accepting Libra would mean to give up vast control of international commerce, currency controls and taxation control. Countries as we know it would diminish and big tech would step increasingly into the limelight.
But is that such a bad thing?
The evidence is in. Many countries aren’t working that well. Passing USMCA is clearly in the best interests of the US but doing so would give a victory to the current administration, and so it is placed in abeyance by their Congress for a political win. In the United Kingdom, a new leader has purposely prorogued Parliament for political reasons to force a no-deal Brexit – at the jeopardy of the country as a whole.
When Mark Zuckerberg was hauled before Congress last year (I don’t know why his staff advised him to go) he was forced to answer such inane and uneducated questions as:
“How do you sustain a business model in which users don’t pay for your service?” (asked by Sen. Orrin Hatch, R-UT).
“Senator, we run ads,” Zuckerberg replied.
This was in addition to more discussion about the ‘pipes’ of the internet and many questions and demands for regulation from self-righteous law-makers (average age 62) who had clearly never used Facebook or understood anything about current technology issues.
Zuckerberg was polite and apologetic.
A better tact might have been to ask them if Congress worked well, efficiently, and was immune from error.
And a better tact strategically would be for Google, Libra, and other other tech leaders to stop listening to old politics and old institutions.
When the EU continually ‘fines’ Google (hint: revenue generation) perhaps it’s time for Google to ignore the fines, as any sovereign entity might ignore fines imposed by another sovereign entity.
Facebook says 2.7 billion use their service. 2 billion people now use Google services, and the service is as real to them as the roads and rubbish collection services provided by their local governments.
They have a vast amount of power that is untapped and unused. And their servers and data can be relocated out of the reach of any particular country, if needed.
And despite fear stoking and admitted failings, we cannot help but admire that these companies are innovative and work efficiently. What they do with technology has changed the world, largely for the better, in the last decade or two.
This is a new way of progress, innovation, and providing services to customers and citizens that is beyond what can be offered by legacy governments. This is governing and innovation 2.0.
And so why shouldn’t Google, Facebook, and others be entitled to some measure of sovereignty? Why not Libra digital currency? And if the US Dollar takes a hit, why isn’t that just the way of the world when a conflicted body that can no longer govern effectively is overtaken by an agile new challenger?
There is nothing special about sovereignty or a ‘country’. The United Nations can’t even decide what a country really is. Question: Is Palestine a country (137 other countries say it is)? Is Western Sahara? The Holy See? Taiwan (only 16 say it is)? Scotland?
If Facebook can implement Libra, start using it as a currency, and move away from using the US Dollar as central to its operations, it becomes more immune to regulation, taxes, fines and control from legacy government.
And if the Kingdom of Palau (population 21,000) and Nauru (pop 11,000) have recognition as countries – why not accept reality and welcome our digital overlords into the family of sovereign nations?
Nick Greer is a technology lawyer, writer, international commercial arbitrator, and former political adviser based near Vancouver, Canada.