In the Shadow of Sovereignty: Digital Money & Stealth Imperialism

1. In the Shadow of Sovereignty: Digital Money & Stealth Imperialism

2. www.modernmoneynetwork.org The Modern Money Network

4. WTF is Fintech? • The Automation of Finance • Payments & Transfers • Lending & Financing • Retail Banking • Financial Management • Insurance • Coin Markets & Exchanges • Fraud Prevention

5. Big Data, Big Brother, & Lots of Little Brothers • Data is the “exhaust” we create as we move through a computerized society & an “internet of things” • Most surveillance is “voluntary” corporate surveillance • But with financial data, the public/private divide truly breaks down

6. Overview: Facebook Libra Project • Coins, Tokens, Certificates • Calibra (Digital Wallet) • Permissioned Blockchain (Sort Of) • Reserve Fund (ETF/Commodity Pool w/ Hong-Kong style currency board) • Authorized Resellers (“primary dealers”) • Libra Association: can change anything with ⅔ vote (who’s in? who’s out?) • An Army of Lobbyists (“shaping the regulatory environment”)

7. Tales from the Crypt-o? “...blockchain systems lack sites of centralized power, the term ‘decentralized’ in effect functions as a liability shield for those operating the systems (developers and miners), creating what I call a ‘Veil of Decentralization.’” “The response in the crypto space has been that this is a dystopian nightmare,” says Angela Walch, a professor at St. Mary’s School of Law who specializes in blockchain. “I’m not really sure what these other companies add other than it makes Facebook look like we’re not the only ones doing it.”- Angela Walch

8. Big Tech & “Functional Sovereignty” • “There is government whenever one person or group can tell others what they must do and when those others have to obey or suffer a penalty.” - Robert Lee Hale • “[Major digital firms] aspire to displace more government roles over time, replacing the logic of territorial sovereignty with functional sovereignty. In functional arenas from room-letting to transportation to commerce, persons will be increasingly subject to corporate, rather than democratic, control.” - Frank Pasquale

9. The White Paper’s Burden • “The mission for Libra is a simple global currency and financial infrastructure that empowers billions of people.” • “We believe that we all have a responsibility to help advance financial inclusion, support ethical actors, and continuously uphold the integrity of the ecosystem.” • “This could be an instrument of development, which allows the Free World of the Western nations to preserve the influence that in my opinion is necessary to maintain a good balance in the world.” - David Marcus

10. Recap: Monetary Coercion “In the contemporary United States, workers face a specific challenge. We cannot work for mere biophysical resources. Rather, we must work for money, specifically U.S. legal tender, which can settle private debts, and must satisfy public debts to the state (most notably, taxes). As Duncan Kennedy has noted, people may now receive income outside of labor compensation, but broadly speaking, even with the welfare state, people must sell their labor for money. Property, contract, and tort law, along with the criminal laws that protect reinforce them, set the stage for a struggle for currency. If we do not find a way to produce money on our own, we must toil.” - Raúl Carrillo, “11 Things They Don’t Tell You About Law & Economics”, Law & Inequality: A Journal of Theory and Practice

11. Settlers (of Payments)! • “...the colonial government did not need the colonial currency held by Africans. What they needed was for the African population to need the currency, and that was the purpose of the direct tax.” - Mat Forstater • “...where colonists accommodated indigenous conceptions of currency, they were unyielding about European conceptions of real property.” “...they insisted that natives’ rights with respect to the land after ‘sale’ were extinguished.” - K-Sue Park

12. Manifest Currency • “You can think of closed-loops as mini sovereign zones. Yes, payments can be quickly and easily facilitated within those zones because everyone in them is subject to the same autocratic overseer and thus theoretically the same trust base. They're great if the overseer has large reach.” - Izabella Kaminska • “When a borrower is closely integrated in an e-commerce platform, for example, it may be relatively easy for a big tech to deduct the (monthly) payments on a credit line from the borrower’s revenues that transit through its payment account. Given network effects and high switching costs, big techs could also enforce loan repayments by the simple threat of a downgrade or an exclusion from their ecosystem if in default.” - BIS Annual Economic Report | 23 June 2019 • What does the Libra Association need to start hawking loans on Facebook? • What does the Libra Association need to depreciate the value of Libra or to impose a financial transactions tax?

13. “Imperialism by Stealth” • “A common criticism against dollarisation (and currency blocs) is that they are a form of neocolonialism, handing global powers -- whether they are states or tech behemoths -- another means of exercising control over more vulnerable players. Stablecoins backed by dollar assets are part of the same problem, which is why we believe their adoption in places like Argentina would constitute *imperialism by stealth*.” -- Izabella Kaminska & Claire Jones • “While the currency is pitched as a stable coin, Libra acknowledges that its basket-like nature will ensure the currency fluctuates vis-à-vis the value of domestic or international trade currencies. At the same time, Facebook is gearing this to the unbanked.” --- Izabella Kaminska • “Especially in countries with weak official currencies, a new cryptocurrency may soon become a substitute for retail banking deposits, depriving banks of resources for their credit operations.” - Katharina Pistor

14. HOLD UP. WAIT A MINUTE. “So it isn’t like a shadow bank, it is a shadow bank.” “Remember, almost all the really biggies, what they’re really doing is not whatever the surface thing is that they tell us. It is, they’re getting data, which they then sell to other folks or sometimes they buy the companies that monetize the value of that information. And so they know all kinds of things about people, and a lot of that information is valuable to others; for example, lenders.” - Bill Black

15. #PanoptiCoin • “...t • “The key risk posed by fintech lies in its—still not fully known—potential to exacerbate the financial system’s dysfunctional tendency toward unsustainably self-referential growth.” - Saule Omarova • The Libra Association has stated that it will not know who the users are. Except that almost all of them will be Facebook or Instagram or WhatsApp users. • The Libra Association has promised that data won’t flow from Calibra to Facebook. It’s said nothing about Facebook data going to Calibra. • Nothing about third-parties!

16. Peerscoring as Redlining; Reputation as Collateral • As of now, the Chinese Social Credit system cannot raise or lower scores of individuals based on the scores of a group, or vice versa. Facebook has a patent for that. • “What you end up with is a social system where one's work/labour is effectively enforced by a form of institutionalised ransomware. ‘Go to work and earn the money you owe us, or else we will share information about your bad behaviour with the train service, so you don't get to enjoy your weekend with your family as planned.’” - Izabella Kaminska

17. Wildcat Identification • Global Digital Identity Hegemony. SSNs are not working and ID verification through SSNs is expensive for banks. Most countries’ digital identity structures are broken. Federal privacy law is a vacuum. There is a corporate race to fill the void. Facebook wants to win. • Will cybersecurity concerns drop the “Veil of Decentralization” In its white paper, the Libra Association indicated that the Libra Blockchain is pseudonymous and allows users to “hold one or more addresses that are not linked to their real-world identity.” (BSA/AML issue?)

18. Conclusion “Move Quicker and Build Things”