Banks, Bitcoin, and UBI: Three Competing Money Systems
People often think the way money works is fixed. It isn’t. Over the last century we’ve seen multiple systems rise and fall, each with its own strengths and weaknesses. Right now, three very different models are competing for the future:
1. Banks: Money from the Top Down
- How it works: Banks create money by issuing loans. When a bank approves a mortgage or business loan, it’s essentially typing new deposits into existence, constrained by regulations and capital requirements.
- Costs: This isn’t “free money.” Banks need underwriting departments, compliance teams, and collections systems. They carry credit risk and reputational risk.
- The Catch: Because banks can lend far more than they hold in deposits (fractional reserves), the whole system leans heavily on debt. And since governments themselves borrow trillions through Treasury bonds, the entire economy is locked into a cycle of ever-growing sovereign debt.
2. Bitcoin & Stablecoins: Money as Digital Gold
- How it works: Bitcoin introduced “hard money” — fixed supply, no central bank. Stablecoins like Tether (USDT) or DAI pegged themselves to dollars, often backed by collateral.
- The Bubble Effect: In early years, stablecoins fueled Bitcoin’s rise. Tether printed new USDT, bought BTC, which pushed prices higher — a reflexive loop critics compared to a ponzi.
- The Shift: After regulators pushed back, Tether and others started holding U.S. Treasuries instead of crypto. That means today’s stablecoins don’t just prop up Bitcoin — they prop up U.S. government debt. In a way, the “bubble” just migrated from crypto to sovereign finance.
3. UBI via Intercoin: Money from the Bottom Up
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How it works: Instead of issuing money through banks or speculative assets, communities can issue it directly to people as a universal basic income. That money circulates locally, gets taxed, and can fund public goods.
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Why it’s different:
- No need to overcollateralize or trap capital.
- No reliance on ever-expanding government debt.
- No reflexive bubble where value only comes from speculation.
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The Big Picture: UBI can cushion demand shocks (like automation reducing jobs), make taxes on pollution more politically viable, and recycle money back into public coffers. It’s a feedback loop that supports sustainability instead of instability.
The Third Way
Banks create money top-down through debt. Bitcoin created money sideways through speculation. But a UBI-driven model can create money bottom-up, grounded in real communities and actual human activity.
That’s the path we’re working on with Intercoin: building the infrastructure for towns, cities, and organizations to issue their own currencies and implement UBI at the grassroots level.
Maybe this third way will outlive both the old banking system and the Bitcoin hodl bubble.