The crusaders who left western Europe to “liberate” the Holy Land might seem to have little in common with contemporary Facebook users. But Libra, Facebook’s new cryptocurrency platform, tackles a problem that was familiar in the twelfth century. The spread of promissory notes (letters of credit) in the High Middle Ages caused an upheaval in Eurasian markets. Libra promises to do the same. And just as medieval financial innovations might require demystification, so, too, does Libra.
The crusaders had no easy way of bringing money with them. They couldn’t exactly wire funds or carry debit cards, and their coins were of little use in foreign lands. Gold was heavy and hard to move safely. The solution came from an unexpected source: the Knights Templar. The Templars were originally a Catholic military order that took up residence in Jerusalem, where they pledged to protect Christian pilgrims. They created the economic infrastructure for the Crusades, writing promissory notes in France or England that were redeemable in the Levant. A cipher based on the shape of the cross ostensibly guaranteed the notes’ security. In other words, the Templars created a variant on modern international transfer services, five hundred years before the first central bank.
Today, the demand mounts for a similar system, but on a global scale. Billions of people have no access to banks. Countless others endure high fees and slow transactions, especially when sending money across borders. What we consider a global financial system is, in reality, hardly global. Institutions such as the International Monetary Fund (IMF), the Bank of International Settlements, and the Financial Stability Board provide little more than a multilateral veneer over relationships that are primarily bilateral and dominated by commercial and central banks. Even within borders, moving money involves costly processes of settlement and exchange.
Facebook proposes a new kind of private multilateral institution: the Libra Association. It is based on blockchain technology, which first came to prominence with the cryptocurrency Bitcoin. A blockchain-type network creates
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