29 August 2024

Facebuck: The Political Economy of the Libra ‘Stablecoin’

Jose Miguel Alonso-Trabanco

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.

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