Bitcoin suits Switzerland

Switzerland, a country of freedom, neutrality and decentralization, should be interested in bitcoin. After all, bitcoin is a free, neutral and decentralized currency.

L’original article is published in German in Schweizer Monat.

Article 2 of the Federal Constitution of 1848 stipulated: «The purpose of the Confederation is: to assert the independence of the homeland in relation to third parties, to maintain internal tranquillity and order, to safeguard the freedom and rights of the Confederates and to promote their common prosperity». It was on this basis that a once poor and backward country became one of the richest in the world. Since then, technical developments have changed many things, and the progress that goes with them is moving ever faster. Today's world is much more interconnected and international than it was 175 years ago and, with the advent of the Internet, less territorialized. Laws are still local, but work, production and communication are increasingly global in the information age, and business models are internationalized.

This new era also gave rise to a new type of currency during the financial crisis of 2008/2009: bitcoin. It has no clear creator, and is not issued by any central authority. It is open (and therefore accessible to all), transparent (and therefore verifiable by all), censorship-resistant (and therefore freely usable by all) and organized in limited quantities and in a decentralized way (and therefore difficult to manipulate, whether by states or multinationals).

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All these characteristics apply to a greater or lesser extent to gold, as they do to other precious metals. But bitcoin is more practical than gold and perfectly suited to the information age: on the one hand, the cryptographically-secured currency makes it possible to store the value of very large sums in a very small space. On the other hand, this infinitely divisible currency enables very small amounts to be transferred in a matter of seconds via the Lightning Network, as with Twint. The two fundamental requirements of money in everyday life - its usefulness as a store of value and as a means of payment - are thus satisfied.

But bitcoin also reflects the values associated with Switzerland, a traditionally liberal country:

1. Voluntary work.

While Swiss franc banknotes and coins are subject to a legal obligation to be accepted by everyone, bitcoin is not bound by any constraints. Its use remains voluntary and therefore peaceful: like a contract freely entered into, it is only concluded if both parties agree. Bitcoin simply aims to become the monetary infrastructure of a world based exclusively on free exchange and collaboration. And it provides individuals with the tools they need to act without being controlled by the state. Like products and companies on a free market, bitcoin remains an offer. The Confederation is also a society of consent, which can be entered by marriage or naturalization.

2. Neutrality.

As Professors Andrew Bailey and Craig Warmke point out in their article «Neutral Money: Why Bitcoin Stands Apart», bitcoin was born neutral, neutral in current monetary policy, neutral in transmission. Bitcoin is therefore truly neutral, and imposes itself on no one. Just like Switzerland, which offers its good offices as a mediator in international conflicts. It thus embodies the principle of non-aggression described by the American economist Murray Rothbard, according to which no aggression, whether emanating from a state or an individual, can have any moral justification. Like any liberal, Switzerland wants its companies and people to be able to trade freely with the whole world, and to be left alone for the rest.

3. Decentralization.

No central entity can dominate bitcoin. In practice, this means that none of the parties involved will ever have the majority of voting shares required for fundamental change. Just as Switzerland, organized on a federal basis, has developed a sophisticated system for distributing power between the Confederation, cantons and communes, power in the case of Bitcoin is distributed between miners, node operators and coin holders. What happens in one case according to the rules of the Federal Constitution, follows in the case of Bitcoin the rules of the immutably inscribed code.

4. Stability.

While inflation has returned with a vengeance, the franc remains remarkably stable. Even though the 1879 dime has lost much of its purchasing power, it can still be used today. Bitcoin's infrastructure, with its Swiss-precision clockwork, also stands out for its stability: every ten minutes on average, miners find a new block, which is then added to the blockchain's longest chain. For fifteen years, without interruption. And there's no end in sight.

The question of whether you're currently paying 1,000 francs for a bitcoin or 100,000 francs is the subject of much discussion and is important in everyday life. These price fluctuations, measured against the yardstick of fiat currency, are currently the inescapable fate of a young currency whose roadmap for money supply expansion remains transparent to all, immutable and limited to 21 million units. Unlike inflationary fiat currencies, bitcoin is governed by the concept of absolute scarcity. As a result, a bitcoin remains a bitcoin, reliably - it couldn't be more stable.

How a union can succeed

In any case, price discussions distract attention from the question of the long-term strategy to be adopted. The idea of marketing the canton of Zug as «Crypto Valley» was a good one. Now, cities like Lugano are following suit. Indeed, many Swiss companies have already found a business model around bitcoin, employing staff and paying taxes. If Switzerland can make progress along this path, it will become a pioneer in crypto services. The big banks, which have so far almost completely missed out on the currency revolution, have plenty of room for improvement.

The Swiss National Bank (SNB) should also do its homework. In 2022, it suffered a loss of CHF 132 billion on its currency mountain. If it wants to reduce its risk of loss, it must continue to diversify its currency reserves: away from the euro, the US dollar and other traditional reserve currencies, as these are investments that are set to lose 5% to 10% of their value every year in the coming years, due to high inflation alone. What's more, these currencies are backed by states that can use them for their own political interests. In addition to the classic gold, the innovative bitcoin offers an alternative. A request to this effect was submitted to the SNB General Meeting in 2022. The SNB replied that it was already technically in a position to buy bitcoin, but that it would not do so for the time being for reasons of monetary policy.

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Those who value classic Swiss values should reconsider their skeptical attitude towards the free, neutral, decentralized and censorship-resistant currency project, and take an unprejudiced look at bitcoin and its special features.

From issue to issue, Le Regard Libre translates articles from the German-language magazine Schweizer Monat. Ronnie Grob is editor-in-chief.

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