Europe takes a big step towards a post-dollar world
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
There's a reason every decentralized system eventually finds its way onto a platform: platforms solve real-world problems that platform users struggle to solve for themselves.
I've written before about the indie/outsider author Crad Kilodney, who wrote, edited, typeset and published chapbooks of his weird and wonderful fiction, and then sold his books from Toronto street-corners with a sign around his neck reading VERY FAMOUS CANADIAN AUTHOR BUY MY BOOKS (or, if he was feeling spicy, simply: MARGARET ATWOOD):
Crad was a hell of a writer and a bit of a force of nature, but there are plenty of writers I want to hear from who are never going to publish their own books, much less stand on a street-corner selling them with a MARGARET ATWOOD sign around their necks. Publishers, editors, distributors and booksellers all do important work, allowing writers to get on with their writing, taking all the other parts of the publishing process off their shoulders.
That's the value of platforms. The danger of platforms is when they grow so powerful that they usurp the relationship between the parties they are supposed to be facilitating, locking them in and then extracting value from them (someone should coin a word to describe this process!):
Everyone needs platforms: writers, social media users, people looking for a romantic partner. What's more, the world needs platforms. Say you want to connect all 200+ countries on Earth with high-speed fiber lines; you can run a cable from each country to every other country (about 21,000 cables, many of them expensively draped across the ocean floor), or you can pick one country (preferably one with both Atlantic and Pacific coasts) and run all your cables there, and then interconnect them.
That's America, the world's global fiber hub. The problem is, America isn't just a platform for fiber interconnections – it's a Great Power that uses its position at the center of the world's fiber networks to surveil and disrupt the world's communications networks:
https://en.wikipedia.org/wiki/Edward_Snowden
That's a classic enshittification move on a geopolitical scale. It's not the only one America's made, either.
Consider the US dollar. The dollar is to global commerce what America's fiber head-ends are to the world's data network: a site of essential, (nominally) neutral interchange that is actually a weapon that the US uses to gain advantage over its allies and to punish its enemies:
The world's also got about 200 currencies. For parties in one country to trade with those in another country, the buyer needs to possess a currency the seller can readily spend. The problem is that setting up 21,000 pairwise exchange markets from every currency to every other currency is expensive and cumbersome – traders would have to amass reserves of hundreds of rarely used currencies, or they would have to construct long, brittle, expensive, high-risk chains that convert, say, Thai baht into Icelandic kroner to Brazilian reals and finally into Costa Rican colones.
Thanks to a bunch of complicated maneuvers following World War II, the world settled on the US dollar as its currency platform. Most important international transactions use "dollar clearing" (where goods are priced in USD irrespective of their country of origin) and buyers need only find someone who will convert their currency to dollars in order to buy food, oil, and other essentials.
There are two problems with this system. The first is that America has never treated the dollar as a neutral platform; rather, American leaders have found subtle, deniable ways to use "dollar dominance" to further America's geopolitical agenda, at the expense of other dollar users (you know, "enshittification"). The other problem is that America has become steadily less deniable and subtle in these machinations, finding all kinds of "exceptional circumstances" to use the dollar against dollar users:
America's unabashed dollar weaponization has been getting worse for years, but under Trump, the weaponized dollar has come to constitute an existential risk to the rest of the world, sending them scrambling for alternatives. As November Kelly says, Trump inherited a poker game that was rigged in his favor, but he still flipped over the table because he resents having to pretend to play at all:
Once Trump tried to steal Greenland, it became apparent that the downsides of the dollar far outweigh its upsides. Last month, Christine Lagarde (president of the European Central Bank) made a public announcement on a radio show that Europe "urgently" needed to build its own payment system to avoid the American payment duopoly, Visa/Mastercard:
Now, there's plenty of reasons to want to avoid Visa/Mastercard, starting with cost: the companies have raised their prices by more than 40% since the pandemic started (needless to say, updating database entries has not gotten 40% more expensive since 2020). This allows two American companies to impose a tax on the entire global economy, collecting swipe fees and other commissions on $24t worth of the world's transactions every year:
But there's another reason to get shut of Visa/Mastercard: Trump controls them. He can order them to cut off payment processing for any individual or institution that displeases him. He's already done this to punish the International Criminal Court for issuing a genocide arrest warrant for Benjamin Netanyahu, and against a Brazilian judge for finding against the criminal dictator Jair Bolsonaro (Trump also threatened to have the judge in Bolsonaro's case assassinated). What's more, Visa/Mastercard have a record of billions (trillions?) of retail transactions taking place between non-Americans, which Trump's officials can access for surveillance purposes, or just to conduct commercial espionage to benefit American firms as a loyalty bonus for the companies that buy the most $TRUMP coins.
Two days after Lagarde's radio announcement, 13 European countries announced the formation of "EuroPA," an alliance that will facilitate regionwide transactions that bypass American payment processors (as well as Chinese processors like Alipay):
There's Wero, a 2024 launch from the 16-country European Payments Initiative, which currently boasts 47m users and 1,100 banks in Belgium, France and Germany, who've spent €7.5b through the network:
Wero launched as a peer-to-peer payment system that used phone numbers as identifiers, but it expanded into retail at the end of last year, with several large retailers (such as Lidl) signing on to accept Wero payments.
Last week, Wero announced an alliance with EuroPA, making another 130m people eligible to use the service, which now covers 72% of the EU and Norway. They're rolling out international peer-to-peer payments in 2026, and retail/ecommerce payments in 2027.
These successes are all the more notable for the failures they follow, like Monnet (born 2008, died 2012). Even the EPI has been limping along since its founding, only finding a new vigor on the heels of Trump threatening EU member states with military force if he wasn't given Greenland.
As EBM writes, earlier efforts to build a regional payment processor foundered due to infighting among national payment processors within the EU, who jealously guarded their own turf and compulsively ratfucked one another. This left Visa/Mastercard as the best (and often sole) means of conducting cross-border commerce. This produced a "network effect" for Visa/Mastercard: since so many Europeans had an American credit card in their wallets, European merchants had to support them; and since so many EU merchants supported Visa/Mastercard, Europeans had to carry them in their wallets.
Network effects are pernicious, but not insurmountable. The EU is attacking this problem from multiple angles – not just through EuroPA, but also through the creation of the Digital Euro, a Central Bank Digital Currency (CBDC). Essentially, this would give any European who signs up an account with the ECB, the federal bank of the Eurozone. Then, using an app or a website, any two Digital Euro customers could transfer funds to one another using the bank's own ledgers, instantaneously and at zero cost.
EBM points out that there's a critical difficulty in getting EuroPA off the ground: because it is designed to be cheap to use, it doesn't offer participating banks the windfall profits that Visa/Mastercard enjoy, which might hold back investment in EuroPA infrastructure.
But banks are used to making small amounts of money from a lot of people, and with the Digital Euro offering a "public option," the private sector EuroPA system will have a competitor that pushes it to continuously improve its systems.
It's true that European payment processing has been slow and halting until now, but that was when European businesses, governments and households could still pretend that the dollar – and the payment processing companies that come along with it – was a neutral platform, and not a geopolitical adversary.
If there's one thing the EU has demonstrated over the past three years, it's that geopolitical threats from massive, heavily armed mad empires can break longstanding deadlocks. Remember: Putin's invasion of Ukraine and the end of Russian gas moved the EU's climate goals in ways that beggar belief: the region went from 15 years behind on its solar rollout to ten years ahead of schedule in just a handful of months:
