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 ā 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 ā 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 ā¬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 ā 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 ā and the payment processing companies that come along with it ā 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:
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In their 2023 book Underground Empire, political scientists Henry Farrell and Abraham Newman describe how the modern world runs on US-based systems that other nations treat(ed) as neutral platforms, and how that is collapsing:
Think of the world's fiber optic cables: for most of the internet's history, it was a given that one end of the majority of the world's transoceanic fiber would make landfall on one of the coasts of the USA. US telcos paid to interconnect these fiber head-ends ā even ones on opposite coasts ā with extremely reliable, high-speed links.
This made a certain kind of sense. Pulling fiber across an ocean is incredibly expensive and difficult. Rather than run cables between each nation in the world, countries could connect to the US, and, in a single hop, connect to anywhere else.
This is a great deal, provided that you trust the USA to serve as an honest broker for the world's internet traffic. Then, in 2013, the Snowden leaks revealed that America's National Security Agency was spying on pretty much everyone in the world.
Since then, the world has undergone a boom in new transoceanic fiber, most of it point-to-point links between two countries. Despite the prodigious logistical advantages of a hub-and-spoke model for ocean-spanning fiber networks, there just isn't any nation on Earth that can be entrusted with the world's information chokepoint, lest they yield to temptation to become the world's gatekeeper.
Don't get me wrong: there are also advantages to decentralized (or even better, distributed) interconnections in the world's data infrastructure. A more dispersed network topology is more resilient against a variety of risks, from political interference to war to meteor strikes.
But connecting every country to every other country is a very expensive proposition. Our planet has 205 sovereign nations, and separately connecting each of them to the rest will require 20,910 links.
In complexity theory, this is an "Order N-squared" ("O(n^2)") problem ā every additional item in the problem set squares the number of operations needed to solve it. We aren't anywhere near a world where every country has a link to every other country on Earth. Instead, we're in an unsettled period, where warring theories about how to decentralize, and by how much, have created a weird, lopsided network topology.
Obviously, fiber interconnection isn't the most important "neutral platform" that the US (formerly) provided to the rest of the world. The most important American platform is the US dollar, which most countries in the world use as a reserve currency, and also as a standard for clearing international transactions. If someone in Thailand wants to buy oil from someone in Saudi Arabia, they do so in dollars. This is called "dollar clearing."
The case for dollar clearing is similar to the case for linking all the world's fiber through US data-centers. It's a big lift to ask every seller to price their goods in every potential buyer's currency, and it's a lot to ask every Thai baht holder to race around the world seeking someone who'll sell them Saudi riyals ā and then there's the problem of what they do with the change left over from the transaction.
Establishing liquid markets for every pair of every currency has the same kind of complexity as the problem of establishing fiber links between every country.
Since the mid-20th century, we've solved this problem by treating the US dollar as a neutral platform. Countries opened savings accounts at the US Federal Reserve and stashed large numbers of US dollars there (when someone says, "China owns umpty-billion in US debt," they just mean, "There's a bank account in New York at the Fed with China's name on it that has been marked up with lots of US dollars").
Merchants, institutions and individuals that wanted to transact across borders used the SWIFT system, which is nominally international, but which, practically speaking, is extremely deferential to the US government.
Issuing the world's reserve and reference currency was a source of enormous power for the US, but only to the extent that it used that power sparingly, and subtly. The power of dollarization depended on most people believing that the dollar was mostly neutral ā that the US wouldn't risk dollar primacy by nakedly weaponizing the dollar. Dollarization was a bet that America First hawks would have the emotional maturity to instrumentalize the dollar in the most sparing and subtle of fashion.
But today, no one believes that the dollar is neutral. First came the Argentine sovereign debt default: in 2001, the government of Argentina wiped out investors who were holding its bonds. In 2005, a group of American vulture capitalists scooped up this worthless paper for pennies, then sued in New York to force Argentina to make good on the bonds, and a US court handed over Argentina's foreign reserves, which were held on US soil.
That was the opening salvo in a series of events showed everyone in the world that the US dollar wasn't a neutral platform, but was, rather, a creature of US policy. This culminated with the Russian invasion of Ukraine, which saw the seizure of Russian assets in the USA and a general blockade on Russians using the SWIFT system to transfer money.
Whether or not you like the fact that Russian assets were transferred to Ukraine to aid in its defense against Russian aggression (I like it, for the record), there's no denying that this ended the pretense that the dollar was a neutral platform. It was a signal to every leader in the world that the dollar could only be relied upon for transaction clearing and foreign reserves to the extent that you didn't make the USA angry at you.
Today, Donald Trump has made it clear that the US's default posture to every country in the world is anger. The US no longer has allies, nor does it have trading partners. Today, every country in the world is America's adversary and its rival.
But de-dollarization isn't easy. It presents the same O(n^2) problem as rewiring the world's fiber: creating deep, liquid markets to trade every currency against every other currency is an impossible lift (thus far), and there's no obvious candidate as a replacement for the dollar as a clearing currency.
As with fiber, we are in an unsettled period, with no obvious answer, and lots of chaotic, one-off gestures towards de-dollarization. For example, Ethiopia is re-valuing its foreign debt in Chinese renminbi:
But fiber and dollars aren't the only seemingly neutral platforms that America provided to the world as a way of both facilitating the world's orderly operation and consolidating America's centrality and power on the global stage.
America is also the world's great digital exporter. The world's governments, corporations and households run on American cloud software, like Google Docs and Office365. Their records are held in Oracle databases. Their messages and media run on iPhones. Their cloud compute comes from AWS.
The Snowden revelations shook this arrangement, but it held. The EU extracted a series of (ultimately broken) promises from the US to the effect that America wouldn't spy on Europeans using Big Tech. And now, after a brittle decade of half-measures and uneasy peace with American tech platforms, Trump has made it clear that he will not hesitate to use American tech platforms to pursue his geopolitical goals.
Practically speaking, that means that government officials that make Trump angry can expect to have their cloud access terminated:
Trump can ā and does ā shut down entire international administrative agencies, without notice or appeal, as a means of coercing them into embracing American political goals.
What's more, US tech giants have stopped pretending that they will not share sensitive EU data ā even data housed on servers in the EU ā with American spy agencies, and will keep any such disclosures a secret from the European governments, companies and individuals who are affected:
But the Eurostack's proponents are really working on the preliminaries to digital sovereignty. It's not enough to have alternatives to US Big Tech. There also needs to be extensive work on migration tools, to facilitate the move to those alternatives. No one is going to manually copy/paste a million documents out of their ministry or corporation's GSuite repository and into a Eurostack equivalent. There are a few tools that do this today, but they're crude and hard to use, because they are probably illegal under America's widely exported IP laws.
Faithfully transferring those files, permissions, edit histories and metadata to new clouds will require a kind of guerrilla warfare called "adversarial interoperability." Adversarial interoperability is the process of making a new thing work with an existing thing, against the wishes of the existing thing's manufacturer:
The problem is that adversarial interoperability has been mostly criminalized in countries all around the world, thanks to IP laws that prohibit study, reverse engineering and modification of software without permission. These laws were spread all over the world at the insistence of the US Trade Representative, who, for 25 years, has made this America's top foreign trade priority.
Countries that balked at enacting laws were threatened with tariffs. Virtually every country in the world fell into line:
But then Trump happened. The Trump tariffs apply to countries that have voluntarily blocked their own investors and entrepreneurs from making billions by supplying products that unlock and improve America's enshittified tech exports. These blocks also exposed everyone in the world to the data- and cash-plundering scams of US Big Tech, by preventing the creation of privacy blockers, alt clients, jailbreaking kits, and independent app stores for phones, tablets and consoles.
What's more, the laws that block reverse-engineering are also used to block repair, forcing everyone from train operators to hospitals to drivers to everyday individuals to pay a high premium and endure long waits to get their equipment serviced by the manufacturer's authorized representatives:
These US-forced IP laws come at a high price. They allow American companies to pick your nation's pockets and steal its data. They interfere with repair and undermine resiliency. They also threaten security researchers who audit critical technologies and identify their dangerous defects:
On top of that, they expose your country to a range of devastating geopolitical attacks by the Trump administration, who have made it clear that they will order American tech companies to brick whole governments as punishment for failing to capitulate to US demands. And of course, all of these remote killswitches can be operated by anyone who can hack or trick the manufacturer, including the Chinese state:
Speaking of China, isn't this exactly the kind of thing we were warned would happen if we allowed Chinese technology into western telecommunications systems? The Chinese state would spy on us, and, in times of extremis, could shut down our critical infrastructure with a keystroke.
This is exactly what America is doing now (and has been doing for some time, as Snowden demonstrated). But it's actually pretty reasonable to assume that a regime as competent and ambitious (and ruthless) as Xi Jinping's might make use of this digital power if doing so serves its geopolitical goals.
And there is a hell of a lot of cloud-connected digital infrastructure that Xi does (or could) control, including the solar inverters and batteries that are swiftly replacing fossil fuel in the EU:
And if you're worried about China shutting down your solar energy, you should also worry about America's hold on the embedded processors in your country's critical systems.
Take tractors. Remember when Putin's thugs looted millions of dollars' worth of tractors from Ukraine and spirited them away to Chechnya? The John Deere company sent a kill command to those tractors and bricked them, rendering them permanently inoperable:
Sure, there's a certain cyberpunk frisson in this tale of a digital comeuppance for Russian aggressors. But think about this for ten seconds and you'll realize that it means that John Deere can shut down any tractor in the world ā including all the tractors in your country, if Donald Trump forces them to:
The national security case for digital sovereignty includes people worried about American aggression. It includes people worried about Chinese aggression. It includes people worried about other countries that might infiltrate and make use of these remote kill switches. And it includes people worried about criminals doing the same.
True digital sovereignty requires more than building Eurostack data-centers and the software to run on them. It requires more than repealing the IP laws that block cloud customers from migrating their data to those Eurostack servers. It requires the replacement of the cloud software and embedded code that power our infrastructure and administrative tools.
This is a gigantic task. Ripping out all the proprietary code that powers our cloud software and devices and replacing it with robust, auditable, user-modifiable free/open source software is a massive project.
It's also a project that's long overdue. And crises precipitate change. Putin's invasion of Ukraine vaporized every barrier to Europe's solar conversion, rocketing the bloc from ten years behind schedule to fifteen years ahead of schedule in just a few years.
The fact that changing out all the proprietary, opaque, vulnerable code in our world and replacing it with open, free, reliable code is hard has no bearing on whether it is necessary.
It is necessary. What's more, replacing all the code isn't like replacing the dollar, or replacing the fiber. It isn't hamstrung by the O(n^2) problem.
Because if the Eurostack code is open and free, it can also be the Canadian stack, the Mexican stack, the Ghanaian stack, and the Vietnamese stack. It can be a commons, a set of core technologies that everyone studies for vulnerabilities and improves, that everyone adds features to, that everyone localizes and administers and bears the costs for.
It is a novel and curious form of "international nationalism," a technology that is more like a science. In the same way that the Allies and the Axis both used the same radio technologies to communicate, a common, open digital infrastructure is one that everyone ā even adversaries ā can rely upon.
This is a move that's long overdue. It's a move that's in the power of every government, because it merely involves changing your own domestic laws to enable adversarial interoperability. Its success doesn't depend on a foreign state forcing Apple or Google or Microsoft or Oracle to do something they don't want to do:
The opportunity and challenge of building the post-American internet is part of the package of global de-Americanization, which includes running new fiber and de-dollarization. But the post-American internet is unique in that it is the only part of this project that can be solved everywhere, all at once, and that gets cheaper and easier as more nations join in.
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:
