Fiat currency must be backed by Bitcoin and not gold

  • Adam Back champions the cause of the Swiss Franc (CHF) being backed by Bitcoin.
  • Inflation and struggling fiat currencies are forcing investors into Bitcoin.

Famous 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 Switzerland’s Swiss franc (CHF) came off the gold standard in 2000. It was one of the last major currencies to come off the gold standard. Back made the suggestion via Twitter on Friday.

Historically, Swiss law requires that 40 percent of the Swiss franc be backed by gold reserves. This gold-backed standard became law in the 1920s. But it was terminated on May 1, 2000, after a referendum. Thus, converting the Swiss franc into fiat money.

Other industry insiders are throwing their weight behind Back’s cause. PixelMatic CEO and fellow Bitcoin advocate Samsom Mow said it would be great to witness the start of the Bitcoin standard as he was not available to view the Gold standard. Some experts argue that the adoption of Bitcoin in Switzerland will not be as surprising as that of El Salvador, since FOMO (fear of missing out) is no more.

However, others argued that Switzerland can use other features of its currency to create a similar effect. For example, the Swiss franc (CHF) is considered by many to be a safe haven currency. It is worth noting that there was another referendum to reintroduce a 20 percent gold standard for the Swiss franc in 2014.

But this referendum did not receive enough support. Therefore, a return to the gold standard is likely to receive overwhelming support based on current macroeconomic conditions. However, Back and other Bitcoin advocates propose that a Bitcoin standard rather than a gold standard would be better for the Swiss franc.

Bitcoin as a haven asset

While the world of traditional finance has long questioned Bitcoin’s reputation as a safe haven asset, events since the beginning of the year have proven otherwise. For example, the Turkish lira (TRY) has lost 26% of its value against the US dollar since January 2022.

Its cumulative inflation rate for the last three years has exceeded 100 percent, as the currency has been steadily declining for the last four years. In its September report, the leading accounting firm, PwC, classified Turkey as a hyperinflationary economy. The report says that Turkey’s economy has been deteriorating since last year, but worsened in mid-summer this year. For perspective, 1 USD is now trading for 18 TRY compared to 2017 when the same 1 USD was trading for 3.5 TRY.

However, the Turks are not just turning to the US dollar. There has also been a gradual increase in BTC/TRY trading volume on centralized exchanges. Data from Binance showed that the Bitcoin price in TRY spiked to its peak early last year. Furthermore, the 24-hour trading volume of the BTC/TRY pair reached an all-time high in May 2022.

Spikes in Bitcoin trading volume might not indicate mass adoption is near. However, it does suggest that the leading digital asset is beginning to act as a haven asset. Investors are flocking to Bitcoin as fiat currencies continue to struggle under rising inflation and tough macroeconomic conditions.

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