Fiat currency should be backed by Bitcoin and not gold
- Adam Back champions the cause for the Swiss Franc (CHF) to be backed by Bitcoin.
- Inflation and struggling fiat currencies are forcing investors to get into Bitcoin.
Well-known Bitcoin enthusiast and HashCash inventor Adam Back has suggested that it is time to have a referendum to return Bitcoin to the Swiss Franc. Back said the Swiss franc (CHF) went off the gold standard in 2000. It was one of the last major currencies to drop off the gold standard. Back made the proposal via Twitter on Friday.
Switzerland’s Swiss Franc 🇨🇭 CHF went off the gold standard in 2000 (40% gold backed by law 1920-2000), the last of the major currencies to fall off the gold standard. Time for another referendum #bitcoin standard CHF. pic.twitter.com/Peg9T4Y71j
— Adam Back (@adam3us) 6 October 2022
Historically, Swiss law mandates 40 percent of the Swiss franc to be backed by gold reserves. This gold-backed standard became law in the 1920s. But it ended on 1 May 2000, following a referendum. Thus causing the Swiss franc to become fiat money.
Other industry experts support Back’s case. PixelMatic CEO and another Bitcoin advocate, Samsom Mow, said it would be great to witness the start of the Bitcoin standard, having been unavailable to see the gold standard. Some experts argue that Switzerland’s Bitcoin adoption will not be as surprising as El Salvador’s, as the FOMO (fear of missing out) is no longer there.
However, others argued that Switzerland could use other features of the currency to create a similar effect. For example, many people see the Swiss franc (CHF) as a safe currency. It is worth noting that there was another referendum to reinstate a 20 percent gold standard for Swiss francs in 2014.
But this referendum did not receive enough support. Therefore, a return to the gold standard is likely to have overwhelming support based on current macroeconomic conditions. However, Back and other Bitcoin advocates suggest that a Bitcoin standard rather than a gold standard would be better for the Swiss franc.
Bitcoin as a haven
While the traditional financial world has long disputed Bitcoin’s reputation as a safe haven, events since the beginning of the year have proven otherwise. For example, the Turkish lira (TRY) has lost 26 percent of its value against the US dollar since January 2022.
The cumulative inflation rate over the past three years has exceeded 100 percent as the currency has fallen steadily over the past four years. In its September report, top accounting firm PwC classified Turkey as a hyperinflationary economy. The report said Turkey’s economy has been deteriorating since last year, but has worsened in the middle of summer this year. For perspective, 1 USD is now exchanged for 18 TRY compared to 2017, when the same 1 USD was exchanged for 3.5 TRY.
Turks are not flocking to the US dollar alone, however. There has also been a gradual increase in BTC/TRY trading volume on centralized exchanges. Binance data showed that Bitcoin’s price in TRY rose to a peak at the beginning of last year. In addition, the 24-hour trading volume of the BTC/TRY pair rose to an all-time high in May 2022.
The spikes in Bitcoin trading volume may not indicate that mass adoption is near. However, it suggests that the leading digital resource is beginning to function as a haven. Investors are flocking to Bitcoin in droves as fiat currencies continue to struggle amid rising inflation and tough macroeconomic conditions.
