The Swiss National Bank has rejected holding bitcoin reserves, citing concerns over cryptocurrency market liquidity and volatility.
“For cryptocurrencies, market liquidity, even if it may seem ok at times, is especially during crises naturally called into question,” said SNB President Martin Schlegel at the bank’s General Assembly meeting Friday.
“Cryptocurrencies also are known for their high volatility, which is a risk for long term value preservation. In short, one can say that cryptocurrencies for the moment do not fulfill the high requirements for our currency reserves.”
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Schlegel’s comments were prompted by the Bitcoin Initiative, a bitcoin advocacy group whose research demonstrates that adding bitcoin to Switzerland’s treasury would complement its overall portfolio and yield substantial return with minimal volatility.
Without bitcoin, the Swiss National Bank’s investments grew by about 10% since 2015. A 1% bitcoin allocation to the central bank’s portfolio would have nearly doubled returns over the same period, according to a Bitcoin Initiative portfolio simulation. Annualized volatility would have increased only slightly.
The Bitcoin Initiative emphasized that bitcoin’s volatility should not be evaluated in isolation, but in terms of its influence on the overall dynamics and performance of the investment portfolio.
“[Bitcoin] price reached new highs, it showed resilience under market stress, and it continues to be highly liquid with trading volumes in the double digit billions, every day and night, even on bank holidays,” said Luzius Meisser, a member of the Bitcoin Initiative and board member of Bitcoin Suisse.
“The Bitcoin network remains one of the most reliable and secure IT systems ever created. And most remarkably, the United States has started a strategic bitcoin stockpile.”
In an emailed statement to CoinDesk, the Bitcoin Initiative suggested the Swiss National Bank’s aversion to bitcoin might be political, as it could be perceived as “an expression of distrust towards other currencies” and harm delicate relations between Switzerland and the European Union.
European Central Bank President Christine LaGarde has consistently criticized bitcoin, calling it “worth nothing” and a “highly speculative asset” linked to money laundering. In January, Lagarde said “I’m confident” that “bitcoins will not enter the reserves of any of the central banks of the General Council” of the ECB.
That was in response to comments made by Czech National Bank Governor Ales Michl that his institution was evaluating adding bitcoin to its reserves. LaGarde argued that bitcoin fails to meet the ECB’s criteria for liquidity, security, and safety from criminal associations.
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