SNB President Martin Schlegel Rejects the Idea of Holding Bitcoin in the Bank's Reserves

Swiss National Bank (SNB) President Martin Schlegel explained why cryptocurrencies do not fulfill the essential characteristics that a good currency should have

Recently, Swiss National Bank (SNB) President Martin Schlegel rejected the idea of including bitcoin in the bank’s reserves, as suggested by a public initiative, and explained why cryptocurrencies pose several issues as an asset class, in an interview with the Tamedia newspaper group.

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Why Cryptocurrencies Don’t Fit the SNB

The president of the Swiss National Bank (SNB) discussed the reasons why cryptocurrencies do not meet the crucial characteristics demanded of a good currency in an interview with a media group. He highlighted three main issues with cryptocurrencies.

Firstly, he pointed out the high volatility of cryptocurrencies, which renders them unsuitable for maintaining value over the long term.

Secondly, Schlegel emphasized the need for SNB reserves to be highly liquid, enabling swift use in monetary policy if necessary. However, cryptocurrencies face difficulties in this regard due to their limited divisibility and the potential for transaction processing to take several days in the worst-case scenario.

Thirdly, Schlegel noted that cryptocurrencies have security flaws, being based on software, which can have bugs and vulnerabilities. In contrast, the SNB's currency is backed by the bank's balance sheet and the Swiss economy, providing a more secure foundation.

SNB In Competition With Crypto?

Moreover, Schlegel argued that the SNB's role is not to offer cryptocurrencies, and he highlighted the small size of the crypto market. He stated that the total market value of all cryptocurrencies, which amounts to around CHF 2,000 billion, is still insignificant compared to the global financial system.

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 the SNB is not really worried about competition from cryptocurrencies.

The Bitcoin Initiative

A proposal launched last December aims to make the Swiss National Bank (SNB) 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 say 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.