Since 2009 Bitcoin and cryptocurrencies have seen a meteoric rise, however, there are still some sceptics. A large number of banks are beginning to block purchases of cryptocurrencies like Bitcoin and Ethereum. Since Bitcoin was created in 2009 by Satoshi Nakamoto, a referendum in Switzerland, known as the ‘Sovereign Money Intiative’ has also began to gain a lot of attention. It may not be long before we have a Bitcoin based financial system.
The Sovereign Money Initiative proposes a huge change in Switzerland’s financial industry which aims to prevent commercial banks from creating money when they lend beyond their deposits. A system better known as fractional reserve banking.
Contrary to popular belief, fractional reserve banking is in fact how most of the money in the world is created. And is rarely issued by central banks.
Sovereign Money Referendum
The sovereign money referendum was founded in 2014, and is focused on giving the sole responsibility of printing money to the Swiss National Bank. The proposal known as the ‘Vollgeld’ would go back to a system using sovereign money. This would mean that money would become a non-debt based system, a system which has been compared by many to that of Bitcoin and other cryptocurrencies.
The referendum was completed on 10th June, 2018, it was in fact opposed by the central banks. However, it did receive around 500,000 votes which was around 24% of those who were polled.
Would a Bitcoin based financial system work?
Bitcoin’s creation coincided with the global financial crisis in 2009. From this point on, question marks have arisen as to whether or not banks are both responsible and/or effective in their methods.
A non debt based system was discussed by Beat Weber of Oesterreichische Nationalbank (OeNB). Beat Weber wrote a paper called “Bitcoin and the legitimacy crisis of money” in 2013, he compares sovereign money (non debt based systems) to Bitcoin. The paper effectively outlines the many issues which have arisen and could potentially arise in the future with Curren debt based system. while at the same compares how Bitcoin could solve this, as a non debt based system could overcome this in the future.
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.“ (Nakamoto cited in p2p foundation n.d.)
According to Weber, similarities between Bitcoin and sovereign money arise from the implication that for both systems, “money is not safe unless it ceases to be a claim on an issuer”. Weber does seem to think that it is inevitable that we are heading towards digital money.
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