The government of Switzerland has requested a report investigating the possible risks and benefits of launching its own, state-backed cryptocurrency, the ‘e-franc’. The request must be approved by the lower house of the Swiss parliament before it will be allowed to move forward.
“The Federal Council is aware of the major challenges, both legal and monetary, which would be accompanied by the use of an e-franc,” said Vice President of the Swiss Social Democratic party, Cedric Wermut, in response to the request. “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.”
Not Everyone Seems So Keen
The Swiss central bank has historically exercised caution when it comes to its own interactions with cryptocurrency. In April, Andrea Maechler, a member of the Swiss central bank’s governing board, said in a speech that:
“We are convinced that private solutions are better suited to meet the end user needs. Digital central bank money for the general public is not necessary to ensure efficient cashless retail payments. There would be little to no advantage in this respect, incurring incalculable risks in the area of financial stability, and this would call into question the proven two-tier system. Instead of operating as the ‘bank of banks’ today, the SNB would act as a commercial bank towards the end customer. This would aggravate the bank run problem in times of crisis.”
At the same time, Switzerland has become known as one of the world’s most prominent blockchain industry hubs; the Swiss ‘Crypto Valley‘ is home to a number of the world’s most famous blockchain firms and organizations, including the Enterprise Ethereum Alliance.
National Cryptocurrencies: Trending Up?
Nations around the world have adopted or considered adopting national cryptocurrencies, sometimes for less-than-legal purposes. The Venezuelan ‘Petro’ came under much international scrutiny following allegations that the nation was using the Petro as a way to illegally access international debt markets.
An economic advisor to Russian President Vladimir Putin publicly said that Russia’s proposed national cryptocurrency, the “CryptoRuble”, could be used “with no regard for international sanctions.”
However, there are some perfectly legitimate explorations of national cryptocurrencies. Sweden’s Riksbank has been exploring the creation of the ‘e-krona’, which “would have the potential to counteract some of the problems that could arise on the payment market in the future when the use of cash is rapidly declining,” according to a blog post by the bank.
While each country’s plan for a national cryptocurrency is unique, national cryptocurrencies are usually spoken about as being backed by real-world assets, usually on a one-to-one basis with cash notes. For example, one e-krona would be backed by one fiat krona. This would eliminate concerns about volatility that are so often associated with cryptocurrency.
Still, in March, the Bank of International Settlement cautioned the world’s central banks to carefully consider all foreseeable consequences of cryptocurrency before issuing e-currencies of their own.