It is generally trivial to control a nearly unlimited number of IP addresses that are diverse both geographically and otherwise. It is often difficult to tell that these IP addresses are that of a VPN.
There is also the issue of who "decides" where each IP address geolocates to. You would need some kind of central authority to decide this.
It's true that botnets would be powerful attack tools because with this system because every device is equal and only the geographical position matters. I wonder what effect the scale of the regions would have, for instance if the scale of the region would be as big as 1000KM
2 or 10000KM
2. The big question would be if the botnet attacking would be more diversified than the legit nodes (if the network would attract an attack from a huge botnet before the legit nodes spread out enough).
The VPNs aren't actually that big of a problem, because every node funneled through a VPN would be included to the region the VPN provider dwells in.
I was not even thinking of botnets, but yes that would be another problem. I was referring to the fact that there are enough datacenters and datacenter-like facilities that allow users to rent their equipment (and IP addresses) that someone could rent a diverse number of IP addresses.
The same is true with VPN providers. VPN providers often offer multiple gateways that allow people to access the internet "from" multiple locations throughout the world, and often these gateways have multiple servers located in diverse locations in a city/state/country.
I also believe that you somewhat need to trust the entity issuing the IP address if you are to trust the geolocation of a particular IP address.