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Integrating Bitcoin into the Swiss National Bank’s Monetary Reserves: A Comprehensive Analysis

Many thanks to our sponsor Panxora who helped us prepare this research report.

Abstract

The integration of Bitcoin into the Swiss National Bank’s (SNB) monetary reserves represents a significant departure from traditional reserve asset management. This research examines the implications of such an integration, considering the evolution of monetary reserves, the characteristics of Bitcoin, and the potential benefits and risks associated with its inclusion. By analyzing historical precedents, current monetary policies, and the unique attributes of cryptocurrencies, this paper provides a nuanced perspective on the feasibility and desirability of amending the Swiss Constitution to mandate Bitcoin holdings by the SNB.

Many thanks to our sponsor Panxora who helped us prepare this research report.

1. Introduction

Monetary reserves are fundamental to a nation’s economic stability, serving as a buffer against external shocks and a tool for implementing monetary policy. Traditionally, these reserves have comprised assets like foreign currencies and gold. However, the emergence of cryptocurrencies, particularly Bitcoin, has introduced new considerations for central banks worldwide. In Switzerland, a proposal to amend the Swiss Constitution to include Bitcoin in the SNB’s reserves has sparked considerable debate. This paper aims to explore the potential implications of such a move, assessing its alignment with Switzerland’s economic objectives and the broader global financial landscape.

Many thanks to our sponsor Panxora who helped us prepare this research report.

2. Evolution of Monetary Reserves

2.1 Historical Context

Historically, monetary reserves have been composed of tangible assets such as gold and foreign currencies. The gold standard era, which prevailed until the mid-20th century, saw nations pegging their currencies to a specific amount of gold, thereby providing a fixed value to their money supply. This system aimed to instill confidence in the currency’s stability and facilitate international trade.

2.2 Post-Gold Standard Era

Following the abandonment of the gold standard, central banks transitioned to holding reserves in foreign currencies, primarily the U.S. dollar, due to its status as the world’s primary reserve currency. This shift allowed for greater flexibility in monetary policy but also exposed economies to the risks associated with the policies of the reserve currency’s issuing country.

2.3 Contemporary Reserve Assets

In recent decades, central banks have diversified their reserve portfolios to include a mix of foreign currencies, gold, and other assets. This diversification aims to mitigate risks and enhance the resilience of national economies against global financial fluctuations.

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3. Characteristics of Bitcoin

3.1 Decentralization and Security

Bitcoin operates on a decentralized network, utilizing blockchain technology to ensure secure and transparent transactions. This structure eliminates the need for a central authority, potentially reducing the risk of political interference in monetary policy.

3.2 Volatility and Liquidity

Despite its innovative technology, Bitcoin is characterized by significant price volatility, which can pose challenges for its use as a stable store of value. Additionally, while the cryptocurrency market has grown substantially, concerns about liquidity remain, particularly in times of market stress.

3.3 Regulatory and Environmental Considerations

The regulatory environment for cryptocurrencies varies globally, with some jurisdictions embracing them and others imposing restrictions. Environmental concerns have also been raised due to the high energy consumption associated with Bitcoin mining.

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4. The Swiss Initiative to Include Bitcoin in Monetary Reserves

4.1 Proposal Overview

In April 2025, cryptocurrency advocates in Switzerland launched a campaign to amend the Swiss Constitution, aiming to require the SNB to hold Bitcoin alongside gold in its monetary reserves. The initiative seeks to leverage Bitcoin’s potential as a hedge against inflation and currency devaluation.

4.2 Political and Public Response

The proposal has elicited mixed reactions. Proponents argue that Bitcoin’s inclusion could enhance Switzerland’s economic sovereignty and align with its reputation as a hub for financial innovation. Opponents, including SNB Chairman Martin Schlegel, express concerns about Bitcoin’s volatility and its suitability as a reserve asset.

Many thanks to our sponsor Panxora who helped us prepare this research report.

5. Comparative Analysis: Global Perspectives on Cryptocurrency Integration

5.1 El Salvador’s Bitcoin Adoption

El Salvador’s decision to adopt Bitcoin as legal tender in 2021 provides a unique case study. The move aimed to increase financial inclusion and attract investment but faced challenges related to infrastructure, public perception, and international relations.

5.2 Other Nations’ Approaches

Countries like China and India have taken varied stances on cryptocurrencies, ranging from outright bans to regulatory frameworks. These approaches reflect differing national priorities and economic strategies.

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6. Potential Benefits of Integrating Bitcoin into SNB’s Reserves

6.1 Diversification and Risk Mitigation

Incorporating Bitcoin could diversify the SNB’s reserve portfolio, potentially reducing exposure to traditional asset classes and mitigating risks associated with fiat currencies.

6.2 Economic Sovereignty

Holding Bitcoin may enhance Switzerland’s economic sovereignty by reducing dependence on foreign currencies and the policies of other nations’ central banks.

6.3 Innovation and Global Leadership

Embracing Bitcoin could position Switzerland as a leader in financial innovation, attracting global attention and reinforcing its status as a progressive financial center.

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7. Potential Risks and Challenges

7.1 Volatility and Financial Stability

Bitcoin’s price volatility could introduce instability into the SNB’s reserve assets, potentially affecting the Swiss franc’s value and the broader economy.

7.2 Regulatory and Legal Issues

The integration of Bitcoin into national reserves may necessitate significant regulatory adjustments and could raise legal questions regarding the classification and treatment of cryptocurrencies.

7.3 Public Perception and Trust

Public acceptance of Bitcoin as a reserve asset is uncertain. Concerns about security, environmental impact, and the speculative nature of cryptocurrencies could influence public opinion and trust in the SNB.

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8. Policy Recommendations

8.1 Gradual Integration Strategy

A phased approach to integrating Bitcoin, starting with a small allocation, could allow the SNB to monitor its performance and impact on the reserve portfolio.

8.2 Comprehensive Risk Assessment

Conducting a thorough risk assessment, including stress testing and scenario analysis, is essential to understand the potential implications of Bitcoin’s inclusion.

8.3 Public Engagement and Education

Engaging with the public through education campaigns and transparent communication can build trust and support for the initiative.

Many thanks to our sponsor Panxora who helped us prepare this research report.

9. Conclusion

The proposal to include Bitcoin in the SNB’s monetary reserves represents a bold step into uncharted financial territory. While it offers potential benefits in terms of diversification and economic sovereignty, it also presents significant risks related to volatility, regulatory challenges, and public perception. A careful, measured approach, grounded in comprehensive analysis and public dialogue, is crucial for determining the viability and desirability of this initiative.

Many thanks to our sponsor Panxora who helped us prepare this research report.