The chaos created by Brexit might be far greater than previously thought. An independent Scotland might issue its own currency, former Scottish First Minister Alex Salmond told The Financial Times.

Salmond thinks Scotland might have to leave the United Kingdom; and not find a new home in the Eurozone, The Financial Times reported. His remarks indicate that a Scottish currency is a real possibility.

Salmond would like to see a Scottish currency that is completely separate from the pound. Back in 2014, Salmond supported a currency union between Scotland and the rest of Great Britain. This time he seems to think that a free-floating Scottish currency might work.

Would A Scottish Currency Work?

A Scottish currency would be a risky proposition because nobody knows how the markets would react to it.

The best case scenario would be a Scottish equivalent of the Swiss Franc that would successfully trade on the currency markets. One way to give the Scottish pound an advantage would be to launch it as the first national currency that trades as both a cryptocurrency and paper money.

Another would be to peg it with a cryptocurrency such as Bitcoin or an existing currency like the pound or the dollar. The risk there is that the market might not buy the arrangement.

A major problem Scotland faces is the collapse of oil revenues. Tax receipts from North Sea crude have fallen by 93% since 2014, The Financial Times noted. The country already has a fiscal deficit that equals 9.5% of its Gross Domestic Product.

The worst case scenario is a minor currency with little value that is highly vulnerable to inflation. The last thing the United Kingdom needs is something like the Venezuelan Bolivar circulating, and creating economic chaos.

Scotland as Switzerland

One has to wonder how much the Scottish Dollar; or Scott Coin, would be actually worth. Though having a currency might give Scotland an advantage in the competition to get the banking business that is fleeing the City.

“Ireland and Paris and everybody and their auntie is currently queueing up to secure some of the London business,” Salmond said. “Well, you can add Edinburgh to that list.”

Having a successful currency particularly an easy to trade cryptocurrency might enable Scotland to establish itself as an English-speaking Switzerland or a Singapore in Europe. That raises the all-important question: will the new financial industry would be able to generate enough income to support independent Scotland and make up for the lost oil revenue?

Investors should pay close attention to Salmond’s remarks, because he is close to current First Minister Theodora Sturgeon. Sturgeon would like to hold another Scottish independence referendum by 2019, although Prime Minister Theresa May opposes an early referendum.

Such a vote might occur because May could be forced to go along with Sturgeon’s plan in order to get Scottish support for Brexit. That might lead to a Scottish currency, or a new currency arrangement.

The Age of Volatility

There is one certainty here; any talk of a separate Scottish currency will harm the pound in the exchange rates. That might already be happening the pound lost around 2% of its ballot against the dollar between March 14 and 18, X-rates reported.

Expect wide fluctuations in the pound’s value and exchange rates if the Scottish currency rumors continue. Also expect to see wide fluctuations in the prices of hedging mechanisms such as gold and cryptocurrencies.

Between March 9 and March 18, 2017, the price of one Cryptocurrency; the Linux based Etherum, shot up from $17.84 (€16.59) to $33.68 (€31.32). During the same period the price of the most popular cryptocurrency; bitcoin fell from $1,193.55 (€1,109.92) on March 9, to $970.37 (€902.38) on March 18, 2017.

It looks as if we are living in a new age of volatility driven by an increasingly chaotic political environment. Investors and speculators had better take notice because some formerly reliable currencies might soon lose their value. Huge fortunes will be made and lost if Scotland launches its own currency; and completely disrupts the global markets in the process.