SNB Rejects Bitcoin for Reserves: Volatility, Liquidity, and Security Concerns Persist

The Swiss national bank (SNB) has recently dismissed the idea of including bitcoin in its reserves, as proposed by a public initiative. SNB President Martin Schlegel, in an interview with the Tamedia newspaper group, cited several issues with cryptocurrencies as an asset class, making them unsuitable for the bank's reserves.

Schlegel highlighted three main reasons for his stance. Firstly, he noted the high volatility of cryptocurrencies, which makes them unreliable for maintaining long-term value. Secondly, he emphasized the need for SNB reserves to be highly liquid, allowing for quick use in monetary policy when required. Lastly, Schlegel pointed out the security flaws inherent in cryptocurrencies, as they are based on software that can have bugs and vulnerabilities.

Schlegel also argued that the SNB's role is not to offer cryptocurrencies, noting that the total market value of all cryptocurrencies, around CHF 2,000 billion, is still small compared to the global financial system. He described cryptocurrencies as a "niche phenomenon." When asked about competition from crypto, Schlegel stated that currencies have always competed with each other. However, he emphasized that the Swiss franc is in high demand and that the SNB is not concerned about competition from cryptocurrencies.

Despite the SNB's position, a proposal launched last December aims to make the Swiss National Bank invest in bitcoin. The group behind the "Bitcoin Initiative" has 18 months to collect 100,000 signatures to bring it to a public vote. The plan suggests the SNB should build its currency reserves with earnings, including gold and bitcoin, although it doesn't specify how much bitcoin should be held. The initiative is backed by Yves Bennaïm, an internet pioneer, and other Swiss crypto advocates, whose main goal is to spark a public debate.