In what had been hyped as the “Sovereign Money” referendum, Switzerland voted against a proposed financial system which many had compared positively to cryptocurrency, Bitcoin in particular.
The result of Switzerland’s so called “Sovereign Money” referendum was announced on Sunday (June 10), and resulted in a resounding “No” from the Swiss people. 75.7% of voters were against the Sovereign Money proposition, while 24.3% (around 500,000 votes) were for it.
Sovereign Money ( “Vollgeld” in German) would give the nation’s Central Bank sole control over creating money, instead of continuing with the current system which allows commercial banks to “create” money for credit and loan purposes. Many supporters of Vollgeld had claimed it had many positive similarities to cryptocurrency.
Sovereign Money Compared To Bitcoin
Had the Sovereign Money initiative been successful, it would have ended a system of fractional reserve banking that is unique to Switzerland and has used for centuries. Sovereign Money would mean only the Swiss National Bank the right to “create” money.
Not surprisingly, Beat Weber of the Austrian National Bank was a principle supporter of Sovereign Money. Weber suggested the idea of Sovereign Money could be compared to the use of Bitcoin. According to Weber, the use of Bitcoin or Sovereign Money would eradicate the ability of Swiss commercial banks to “create money” by issuing loans without necessarily having the capital to back them. As Weber said:
“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.”
Even though market polls had consistently suggested that a rejection of Sovereign Money would be the most likely outcome, the opposition were nevertheless nervous. The fact that supporters of the Sovereign Money were able to easily gain the 100,000 signatures necessary to put their proposal to a ballot revealed the ongoing distaste many Swiss nationals still feel about the financial industry a decade after the country’s financial crisis.
What began with the collapse of New York venture capital colossus Lehman Brothers sent shockwaves around the world – Switzerland included. In 2008, the Swiss were forced to bail UBS, its biggest bank.
To the rest of the world, Switzerland are a benchmark when it comes to banking and finance, but the Sovereign Money referendum has given everybody a look inside the inner workings of Swiss currency, and revealed a system that seems both bizarre and overly complicated.