For a glimpse of the future of money, go to Switzerland

Money matters.
Money matters.
Image: Reuters/Denis Balibouse
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What is money?

There are the bills in your wallet and the coins in your pocket, of course. But many people now rarely carry physical cash, instead relying on cards, apps, and the internet to pay for things, make investments, and manage their savings.

Where does that money come from?

This is on the minds of Swiss voters this weekend, as they go to the polls for a referendum on whether to adopt a “sovereign money” system. A victory on Sunday (June 10) would result in a radical overhaul of banking as we know it, with commercial banks only allowed to lend out funds they have on hand, supplied solely by the central bank. It would put an end to the current practice of fractional-reserve banking, by which banks create money, in a sense, because they lend out more than they keep in reserves. (And those loans become deposits at other banks, which become loans…)

The Swiss proposal, though unlikely to pass, is a radical departure from established practices in, of all places, the home of the most established banks around. But the Swiss aren’t the only ones thinking about new forms of money.

Yes, this is where bitcoin comes in.

The stateless, anonymous, decentralized promise of cryptocurrency is the opposite of the Swiss “sovereign money” plan. (Weirdly, Switzerland has also been pitching itself as a base for crypto trading. The Swiss are nothing if not pragmatic.)

Cryptocurrencies like bitcoin can act as a digital store of value, a commodity, and a security, at different times and in different combinations. Instead of central bankers, they are governed by a hive mind, or some preset algorithm. True believers imagine a world in which money as an intermediate means of exchange is entirely unnecessary, because every asset you own—your house, car, airline miles, rights to future work—can be “tokenized,” divided up and stored in tradable, cryptographically secured digital units. Futuristic as this may sound, it in fact traces back to ancient notions of what we considered appropriate means of exchange.

And so the relentless march of technological progress, coupled with shifting trends in policymaking, are expanding the scope of what we consider money. But what about all those anachronistic bills and coins? Research has found that simply looking at at an image of cash releases chemicals in our brain that make us happy. Checking a bank balance on a phone screen just isn’t the same.

There’s a Swiss angle to this, too. As countries around the world phase out high-denomination banknotes in the interest of tackling the drug trade, money-laundering, and other illicit activities, the Swiss have doubled down. The 1,000-franc note (worth $1,015 at current rates) is one of the world’s most valuable strips of paper, and officials say there are no plans to limit its circulation. In fact, some have called for the introduction of a 5,000-franc note.

So, what is money? Who controls it? What does it look like? These questions are all up for debate, nowhere more so than in Switzerland.