Switzerland Rejects Sovereign Money Initiative. But Is the Idea Dead Yet?
Switzerland, one of the most prominent financial centers in the world, has voted down a Sovereign Money Initiative – an approach to veer to a bitcoin-like financial system. Although the proposal failed a referendum, it did manage to garner a 25 percent “yes” vote. The ballot indicates that crypto-esque ideas of debt-free and limited money supply are slowly gaining traction.
Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts
Sovereign Money Initiative Resembles Bitcoin
The groundbreaking strategy that aimed to create a debt-free financial system received support from approximately 25 percent of the population, equating to 500,000 votes. Switzerland’s Central Bank — the Swiss National Bank — expressed its objection to the proposal.
Many financial experts have linked the proposal to a bitcoin-like system. The architect of “Sovereign Money” — the MoMo Group — acknowledged the similarity between crypto and their plan. A board member of the group, Emma Dawnay, said:
“Cryptocurrency and the blockchain do look like where we’re heading. It could have been used under the system we were proposing. Blockchain technology could be how the Swiss government could try to bring debt free new money into the economy. Despite the vote losing the Swiss central bank is looking at similar things.”
Creating a Debt-free Financial System
The Sovereign Money Initiative, known as Vollgeld in German, would give the nation’s Central Bank the sole power to create money, limiting commercial banks’ lending capacity.
Contrary to most pundits’ understanding of the modern banking system, commercial lenders are largely responsible for expanding money supply by creating digital money when they lend to loan applicants. This results in a debt-based financial system.
Were the Swiss proposal approved, banks would have effectively been required to hold 100 percent of reserves against the loans they generate, shoring up the banking system and eliminating the risks associated with a banking shock.
According to Beat Weber of the Austrian National Bank, there is a definite resemblance between sovereign money and bitcoin. Both initiatives remove the ability of commercial banks to create money in the form of issuing loans against deposits they do not have:
“Projects like Bitcoin and Sovereign Money attract attention by suggesting that money is not safe unless it ceases to be a claim on an issue. Instead, it should become a pure asset and be put under strict quantity control. Neglecting the inevitable dependence on others involved in holding money or any other non-consumable asset, the underlying idea is that commodity-like money would enable individual possession of money without dependence on an issuer which may suddenly become unable to make good on its promise.”
Significantly, Switzerland did not experience the financial shock a debt-based monetary system can cause. A sovereign money system might be better tested in a small nation dealt a heavy blow by the reckless and often criminal behavior of bankers leading up to the Global Financial Crisis. Iceland, for example, would make for a more suitable test arena.
Enthusiasm for Blockchain Continues Unabated
Although the Swiss may have voted against the Sovereign Money proposal, the Central Bank remains bullish on blockchain technology. In the past, Swiss National Bank Chairperson Thomas Jordan has said that technological advances could mean that decentralization becomes a new paradigm in financial systems. Jordan was of the opinion that the future could see a blend of traditional and new technology co-existing, though he remains cautious about cryptocurrencies.
Switzerland has been at the forefront of blockchain technology. Zug, an affluent municipality of Switzerland, has commonly been referred as “Crypto Valley” and has, in recent times, become a global hot spot for innovative blockchain projects.
Will we ever see a debt-free financial system? Share your views in the comments section below.
Images via Pixabay