The Federal Council, parliament and the SNB have all come out in opposition, but the final decision rests with Swiss electorate, who will vote in a referendum on the matter later this year. As an alternative to the concept of sovereign money, some academics have launched the idea of making digital central bank money accessible to all. This means that sight deposit accounts with the SNB would no longer remain the sole preserve of banks and a few other financial market participants. The aim of this proposal is thus to broaden the public’s access to central 1  Accounts of the current situation published by the Bank of England and the Deutsche Bundesbank found considerable resonance in the media and the economic blogosphere. Cf. M. McLeay, A. Radia and R. Thomas (2014), Money Creation in the Modern Economy, Bank of England, Quarterly Bulletin, Q1, pp. 14–27; Deutsche Bundesbank (2017), Die Rolle von Banken, Nichtbanken und Zentralbank im Geldschöpfungsprozess, Monatsbericht, April, pp. 15–36. Page 2/12  bank money, without prohibiting banks from creating deposits through lending. However, as I will show, this too leaves a number of questions unanswered. We therefore take a critical stance on this proposal. Let me now turn to the basics of money creation in our present-day financial system. Money creation in today’s financial system Types of money  When speaking about money, we need to distinguish between various types of money.
They feared that if systemically important financial institutions were to suddenly fail, financial sector lending might collapse and the economy implode. So the sovereign money initiative, with its focus on payment transaction accounts, does not resolve the ‘too big to fail’ issue. Regulatory adjustments, of the kind that are already being implemented, offer a better solution. The Swiss sovereign money initiative would likewise have a number of problematic consequences for our monetary policy. The initiative requires that the SNB manage the money supply, an idea we abandoned some 20 years ago. Today, the SNB steers monetary conditions via money market rates, a strategy which has served it well over the years. A switch to monetary targeting would therefore be an unnecessary step backwards from our perspective. Another problem for monetary policy would arise from the mechanism for issuing sovereign money set out in the sovereign money initiative. Sovereign money would be created ‘debtfree’, rather than through the SNB’s market operations, i.e. purchasing securities or granting secured loans. It is by no means the case that the SNB’s monetary policy goals only ever require an increase in the money supply; they can also require a reduction, but it is far from clear how the money supply could be reduced if money were to enter circulation ‘debt-free’, as a sort of ‘gift’. Finally, a more general and significant objection to the sovereign money initiative is that the acceptance of the initiative would plunge the Swiss economy into a period of extreme uncertainty.