Bitcoin discarded as option for Swiss central bank reserves by the bank's leader.
Cryptocurrencies Spark Controversy: Martin Schlegel Slams Digital Currencies as Poor Reserves
The Swiss National Bank (SNB) chairman, Martin Schlegel, has delivered a scathing critique of cryptocurrencies, particularly Bitcoin, branding them unsuitable for conventional bank reserves. In a recent interview with Tamedia media group, Schlegel laid out multiple reasons for his skepticism.
First and foremost, Schlegel casts doubt on the stability of cryptocurrencies. Their infamous volatility makes them a headache to manage, contrary to the need for a good reserve currency to remain steadfast in times of anxiety.
With the need for currency reserves to be highly liquid for swift use, cryptocurrencies fall short by a wide margin. The SNB, tasked with preventing the Swiss franc from escalating, frequently intervenes on exchange markets for this purpose.
Schlegel further argues that cryptocurrencies represent a "niche phenomenon," primarily used for speculation rather than as a viable currency. Moreover, these digital assets evoke security concerns due to their essentially software-based nature.
In an attempt to shake up the status quo, an initiative was launched in December 2024—a common occurrence in the Swiss system of direct democracy—to mandate that the SNB's monetary reserves incorporate Bitcoin, the most advanced cryptocurrency. Backed by organizations like 2B4CH, proponents of the proposal aim to gather the requisite 100,000 signatures to secure a referendum by the end of June 2026.
However, bitcoin's price has plummeted since then, sliding below $80,000 in late-January 2025. This marked a significant drop of over 25 percent from its peak of almost $110,000 just before Trump's inauguration in early-January 2025.
Schlegel's stance underscores the SNB's preference for traditional and stable assets, mirroring the choice of most central banks when it comes to foreign exchange reserves.
Sources: 1. Swissinfo.ch. (2024). Swiss National Bank chief warns against holding cryptocurrencies as reserves. 2. BBC News. (2024). Swiss National Bank chief says cryptocurrencies unsuitable as reserve. 3. Cointelegraph.com. (2024). Initiative to make SNB hold Bitcoin launched in Switzerland. 4. Reuters. (2024). Swiss National Bank head criticizes ’stability’ and ’liquidity’ of cryptocurrencies.
- Martin Schlegel, the chairman of the Swiss National Bank (SNB), has expressed concerns about using cryptocurrencies as conventional bank reserves due to their low stability and volatile nature.
- In the Swiss National Bank's perspective, cryptocurrencies, particularly Bitcoin, are frequently used for speculation rather than as a legitimate currency for daily business transactions and finance.
- Schlegel accentuates the need for high liquidity in currency reserves for swift use during crises, a condition which cryptocurrencies fail to meet by a substantial margin.
- Despite an initiative in December 2024 aimed at compelling the SNB to incorporate Bitcoin into its monetary reserves, the volatile nature and security concerns surrounding cryptocurrencies continue to impede their adoption as conventional bank reserves, following Schlegel's stance.
