The Swiss National Bank (SNB) has just released its financial statements for the year 2024. For the first time since 2022, they show a profit of around 80 billion Swiss francs. This is the highest figure since the institution was founded in 1907. 

Not surprisingly, the SNB's substantial gold reserves benefited fully from the 27% rise in the gold price in 2024. In fact, gold brought the SNB a gain of 21.2 billion Swiss francs. 

In fact, the relationship between the Swiss institution and the precious metal goes back a long way. Today, Switzerland is one of the world's largest holders of gold (almost 1,000 tonnes), and at 115.79 grams per capita, it also has one of the highest per-capita gold ratios in the world. 

Today, however, central banks are faced with a problem. At a time when the United States is considering whether to set up a “strategic Bitcoin reserve”, the Swiss National Bank may also have to take a stand in the months ahead. 

The role of physical gold at the SNB 

Historically, Switzerland has always held large quantities of physical gold. Until 1999, the national currency, the Swiss franc, was partially backed by gold. In fact, 40% of the currency in circulation had to be covered by gold reserves. This gold backing of banknotes was even enshrined in the constitution. 

According to official figures, the Swiss National Bank currently holds almost 1040 tonnes of physical gold. While this level has not changed for almost 15 years, in March 2000, Swiss gold stocks were at their highest level, at almost 2,590 tonnes. 

Indicator of SNB gold holdings over the past 25 years 

In addition, for reasons of diversification in the event of a geopolitical crisis, 10% of this gold is held with the Bank of Canada, 20% with the Bank of England and the remaining 70% is stored in Switzerland, mainly in Zurich and Berne. 

Holding physical gold, a sensitive issue in Switzerland 

The issue of holding this strategic asset has been the subject of debate within the Swiss Confederation for many years. Between 2000 and 2005, the SNB sold more than half its gold holdings following the abolition of gold parity for the Swiss franc in 2000. The proceeds of these sales were divided between the cantons (2/3) and the Confederation (1/3).  

In retrospect, however, this massive sale was heavily criticised. This is understandable, given the trend in gold prices since 2000. Sales at the time, at prices well below current levels, resulted in a significant loss of revenue for Switzerland. 

Another example: in 2014, a popular initiative called ‘Save Switzerland's gold’ sought to require the Swiss National Bank to hold a minimum level of gold equal to 20% of its total assets. The same initiative sought to repatriate all gold held abroad to Switzerland for reasons of sovereignty, financial independence and security. 

This attempt at ‘monetary protectionism’ failed, however, being rejected by 77% of voters. The main reason given was the constraint it would place on the flexibility of Swiss monetary policy. 

In this context, can Bitcoin be a credible alternative? 

In some respects, Bitcoin has a number of similarities with gold, and some people even speak of ‘digital gold’. The main difference is that the supply of Bitcoin is limited, due to the scarcity of this asset. While gold is limited by its very nature, Bitcoin has been programmed to offer a maximum supply of 21 million Btc. These are therefore two deflationary assets. 

Gold and Bitcoin are also two assets that are not issued or mined by central banks or governments. These central banks have no power to regulate or control prices, only to store them. 

Even so, Bitcoin is still difficult to equate with gold. This cryptocurrency is highly volatile, in stark contrast to the stability of gold. What's more, Bitcoin is still very young (created in 2009) and its adoption by governments and institutions is still very limited.  

Finally, it should be remembered that Bitcoin is based above all on a technological infrastructure. As such, this asset is highly dependent on possible government regulation, security breaches or scams. 

Will Bitcoin soon be part of Switzerland's strategic reserves? 

At the end of 2024, a proposal was put forward by a committee advocating ‘a financially strong, sovereign and responsible Switzerland’ to include bitcoin alongside gold in Switzerland's currency reserves.  

In concrete terms, if 100,000 signatures are collected by the summer of 2026, a referendum could be held to amend the constitution to include bitcoin as a currency reserve. If this project succeeds, Switzerland will be the first country in Europe to have gold and bitcoin side by side in its coffers. 

For his part, SNB President Martin Schlegel has reservations about including Bitcoin in the national safe. He believes that this asset is too volatile, still too closely associated with illegal activities and requires too much energy. Furthermore, the regulatory framework is still too vague at present. 

Conclusion 

The role of physical gold remains crucial for a central bank. This asset offers protection against volatility in the financial markets, but also against currency devaluation. As in every period of financial crisis, gold reserves play a stabilising role and can serve as a guarantee to ensure the confidence of markets and economic partners. 

With the idea of including Bitcoin, beyond the political considerations, the debate is really about whether or not it is necessary to introduce financial and technological innovation to modernise reserves. Some governments do not want to miss out on this revolution, while others prefer to stick with the tangible, secure fundamentals that have proven their worth over the decades.