A Liquidity Network would be legal in Ireland

Liquidity Networks would be legal. Just before Christmas, the group obtained a written opinion to that effect from Anthony Collins, S.C. The opinion looked at two issues.

The first was whether quid were currency or money in the eyes of the law and whether, if so, this might make the way we intend to issue them, and other aspects of our proposal, potentially unlawful.

The Opinion was that “Since [the quid] is neither prescribed by the law of Ireland nor is it intended to serve as the generally accepted measure of value and medium of exchange in the State, it is difficult to see how it satisfies the definition of “money” or “currency” for legal purposes. What is proposed …. appears to be a means of exchange that is treated as “money” purely in consequence of local custom and/or the consent of the parties. As such it does not represent or reflect an exercise of monetary sovereignty by the State and thus falls outside the legal definition of “money”. The answer to the first question is thus that Katz is not currency or money in the eyes of the law. As such its introduction is not subject to any prohibition implied by law.”

There’s only one minor problem with this – if my interpretation of the Opinion is correct, the State would not be able to accept quid in payment of its taxes without the quid legally becoming money and this would be in breach of the EU Directive making the euro the single currency. Making the quid money might also affect the basis on which electronic purses could be used by networks. In the past, the EU has insisted that they may only contain euros, or units with a value expressed in euros, whereas we want the quid to be able to float in value relative to the euro. However, these are very much problems for another day, some years in the future.

This should not affect a council accepting quid because a council is not the state itself and would not need to pass a law to enable it to handle quid. I think problems would only arise if central government accepted quid in payment of income tax and VAT as this would require legislation. Such legislation would give the quid “the formal and mandatory backing of the domestic legal system in the State or area in which it circulates” to quote Collins’ authority. This would make the quid money. Whereas “anything which is treated as “money” purely in consequence of local custom or the consent of the parties does not represent or reflect an exercise of monetary sovereignty by the State concerned, and thus cannot be considered as “money” in a legal sense.” would apply to the arrangements made with the local council. So the issue is not the state accepting quid at par (or any other value) with the euro but accepting quid at all if legislation is required for it to do so.

The second question was whether quid were “governed by Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions, such that the system must comply with the requirements set out therein.” After some analysis, the answer was no, in part because the unit was not money. Obtaining this opinion is a relief because had the answer been otherwise, the compliance costs would have been high.