Novi and Diem’s True Face

Facebook’s currency and the system for its peer-to-peer transfer once again confront States with their progressive loss of sovereignty and transfer individual wealth into the hands of a private entity in exchange for a ‘voucher’ by Andrea Monti initially published in Italian by Strategikon an Italian Tech BlogDiem and Novi are a private currency (not a legal tender even though it has a counter value in ‘official’ currency that guarantees its convertibility) and a peer-to-peer transfer system of this private currency. Both were created by Facebook and managed by one of its companies.

In less technical terms, this means that Facebook users (and also non-Facebook users) convert their legal tender money into a kind of ‘voucher’ (Diem) that they can transfer via a bank-like system (Novi) and use only in those shops that accept them instead of institutional currencies. The system works if sender and receiver are willing, by agreement, to accept Diem transactions negotiated through Novi.

What it means to lose the legal tender of a currency

Converting money into Diem – or any other private currency – means losing a key feature: the “legal tender”.

If one wants to pay for something in Europe in Euros, no entity operating in a country that has adopted it can refuse to accept it. Moreover, one can exchange dollars, yen or pesos and use their equivalent in Euros. If, by contrast, one wants to pay in Diem, there are only two options: hope that someone will accept them, or ‘change’ them into legal currency through the Facebook ‘bank’.

It is clear, then, that if one convert Euros into Diem, he is giving a private party his wealth and getting in return the promise that someone else will accept the corresponding voucher.

The difference between public and private currencies

True, also legal tender currencies “work” on the assumption that someone is willing to accept them, but the fundamental difference between a state-issued currency and a private currency is in a different legal nature.

What I wrote in an academic paper on cryptocurrencies  is also valid for Diem:

From a functional point of view, the characteristics of currency were modelled before the advent of electronic money or, better, of the electronic transfer of funds, on the physical object that expressed the exchange value. Therefore, it is traditionally believed that, to be such, a currency must possess, at least, the requirements of: non-perishability (to allow the permanence of the value), scarcity (to allow the exchange and, therefore, the circulation of the currency, but without lowering its value), divisibility (to allow the payment of differentiated prices). Abstractly, cryptocurrencies are endowed with the same properties: a Bitcoin, like a banknote or a coin, does not wear out with use, is scarce (there is a limit to the number of Bitcoins that can be produced through mining) and is divisible into ‘Satoshi’. However, possessing the functional characteristics of a currency does not imply that a cryptocurrency, whatever it is called, can be recognised as such in a legal sense. In fact, minting money and therefore controlling the wealth of the citizens is a prerogative that the constituted power has always exercised, even if the complete theorisation according to which this power is an exclusive attribute of state sovereignty matured in the 16th century, when in 1578 Jean Bodin wrote Les Six livres de la Republique where he argued that: The power to legislate includes all other rights and characteristics of sovereignty, so much so that it could be said that this is the only attribute of sovereignty itself since all others are part of it such as … giving and taking away value and weight from coins.

Hence a substantial difference between Diem and cryptocurrencies. Even with all their criticalities,

until Bitcoin and its derivatives were exchanged on circuits separate from the financial system, they had at least an ideological function: to take away the state’s monopoly on the creation of value and thus to realise at least in part the anarchist utopia.

Why Diem and Novi may be a problem

Unlike cryptocurrencies that have remained outside of financial speculation, however, Diem and Novi are born from scratch as instruments to centralise in the hands of a single private entity the wealth produced by each individual, returning the simple expectation that other people will accept Diem. Although the comparison is not precise, it is like working for somebody that pays the salary with vouchers and owns the shop where (or through which) the worker can spend them.

True: Diem, unlike a cryptocurrency, is ‘guaranteed’ by the equivalent of a state’s gold reserves and therefore has its stability. However, the fact remains that Novi is the only place where it is possible to convert Diem into legal tender.

Finally, these services benefit from the full effect of being ‘Facebook-branded’ and are therefore candidates for gaining significant market shares. They will thus reinforce Facebook’s already dominant position in our lives.

A more severe and structural problem

After the VPNs for Google users and the Private Relay for Apple users , the announcement of the latter’s exercise of its self-attribution of crime prevention powers , Diem and Novi are yet another iteration of a theme that is as critical as governments and parliaments neglect it: the continuous expropriation of state prerogatives by Big Tech, which has now become the lords and masters of ever more significant and more essential parts of our lives.

The value we create with our work, the security and the right to decide what we can think, say, read, see and hear are in the hands of subjects other than the State.

All that is left for us, as in the world of the Matrix, is to produce energy to allow the Architect to exist, only to plunge, once we become useless, into the drainage pipes.

For Neo, this was the moment of liberation. But what about us?

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