Swiss central bank head dismisses idea of holding bitcoin in reserves
Swiss National Bank President Martin Schlegel has firmly dismissed the notion of incorporating bitcoin into the central bank’s reserves. The proposal, put forth by a people’s initiative, suggesting the inclusion of cryptocurrencies in reserves as a diversification strategy, has been met with scrutiny by Schlegel. In an interview with the Tamedia newspaper group, he explained that cryptocurrencies do not meet the fundamental criteria necessary for a reliable currency.
Highlighting the primary concerns with cryptocurrencies, Schlegel emphasized their extreme volatility. This volatility poses a significant risk to the preservation of the value of SNB investments in the long term. Additionally, Schlegel stressed the importance of high liquidity in reserves to enable swift access for monetary policy purposes when required. Furthermore, he raised apprehensions about the security vulnerabilities inherent in cryptocurrencies, which, being software-based, are susceptible to bugs and weaknesses.
Schlegel asserts that the SNB’s primary focus is not on endorsing or utilizing cryptocurrencies. He noted that the total market capitalization of all cryptocurrencies, approximately CHF2,000 billion, is relatively modest when compared to the global financial system. Describing cryptocurrencies as a “niche phenomenon,” he expressed a lack of fear regarding competition between traditional currencies and digital assets like bitcoin.
Responding to inquiries about potential competition from cryptocurrencies, Schlegel reaffirmed the strength and appeal of the Swiss franc. He underlined that throughout history, currencies have always existed in a state of competition with each other. In light of this, the SNB remains unwavering in its confidence in the Swiss franc and does not perceive cryptocurrencies as a threat.
A recent initiative, launched to spark a discussion on the topic, proposes an alteration to the Swiss constitution, mandating that a portion of SNB reserves be allocated to bitcoin. The group behind this proposal, titled “For a financially strong, sovereign and responsible Switzerland (Bitcoin Initiative),” has set out to collect the requisite 100,000 signatures within 18 months to trigger a public vote on the matter. The initiative advocates for diversifying SNB reserves with gold and bitcoin, without specifying the exact proportion to be allocated to bitcoin.
Led by internet pioneer and author Yves Bennaïm from French-speaking Switzerland, along with support from Swiss cryptocurrency advocates, the initiative aims to provoke a meaningful debate on the integration of bitcoin into SNB reserves. By initiating this dialogue, the proponents of the initiative hope to shed light on the implications and considerations associated with embracing cryptocurrencies within the realm of central banking.
