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When commercial banks issue loans to customers, they create money by issuing deposits on the current account of the customer. Proposals for adoption of alternative systems, where a central bank would issue new money, such as the Sovereign Money (SM) system, have gained momentum in recent years.
Commissioned by Iceland’s Prime Minister’s Office, KPMG has laid out the fundamentals of the SM system and conducted a review of public discussions, political coverage and field of academics over the last years.
On Sunday the 10th of June, a referendum about the introduction of a new monetary system will be held in Switzerland.
This marks a historic chance, allowing citizens to vote on who is to issue the money they use: leaving it to commercial banks as practices today or restore this as the exclusive right of the central bank.
Which challenges does digitalization pose to money, banking and monetary policy? Should central banks introduce digital cash to respond to these challenges? Which consequences would digital cash have for the economy? Are other or further reforms needed?