Reuters reported Switzerland is formally considering the possibility of a state-backed cryptocurrency. Its government has asked legislators commission a study on the pros and cons of a Swiss “e-franc.”
Switzerland Considers State Backed E-Franc
Switzerland’s Federal Council explained why it was asking for a formal study of state backed cryptocurrency. “The Federal Council is aware of the major challenges, both legal and monetary, which would be accompanied by the use of an e-franc. It asks that the proposal be adopted to examine the risks and opportunities of an e-franc and to clarify the legal, economic and financial aspects of the e-franc.”
That appears to be quite a turnaround for the Swiss. As little as just over a month ago, its central bank was making statements about crypto’s inherent instability. “Digital central bank money for the general public is not necessary to ensure an efficient system for cashless retail payments. It would deliver scarcely any advantages, but would give rise to incalculable risks with regard to financial stability,” warned Andréa Maechler of the country’s national bank.
Nevertheless, the next step in the process involves parliament’s lower house. It will ultimately decide whether the request moves forward. Most countries considering the idea openly have sought state backed crypto as a means to run afoul of economic sanctions or as a way to deaden domestic enthusiasm for a currency beyond government control. Sanctions are not an issue for Switzerland, and the government has been rather open to the crypto revolution, comparatively.
Not the First, Not the Last
Venezuela is the most recent and notorious example of state backed crypto, and the only country to have implemented the idea. It launched the petro as a clear poke at US policy made against its present administration. The Maduro government used an ERC-20 token platform to launch the state backed crypto, which Mr. Maduro insists will be ultimately backed by barrels of oil. In addition, the government has announced special initiatives and incentives to encourage Venezuelans to adopt its usage. In the tightly controlled media of the country, figures and facts on the ground are hard to substantiate in terms of petro’s success. For its part, the Trump administration was unnerved enough to issue an Executive Order formally forbidding US citizens from holding the petro.
Regionally closer, Sweden has taken similar steps to that of Switzerland. Riksbank seems to be in an overt process of encouraging a completely cashless society, and Swedes appear eager to follow. A natural evolution of that idea, and to keep its citizens under the careful eye of government minders, a state backed crypto might just be the answer.
Again, a Swiss crypto is by no means a foregone conclusion. Though influential politicians like Cédric Wermuth, Social Democratic Party vice president, have encouraged the study, the idea faces legislative obstacles. As Reuters notes, “In Switzerland, if the proposal is approved, a study will be produced by the Swiss finance ministry. No timing has been given on when it would be published should the go-ahead be given.”