The Swiss National Bank (SNB), along with the Swiss government’s Federal Council, has conducted a study on the use of Bitcoin and other virtual currencies, which has prompted the Swiss government to refrain from enacting any specific Bitcoin regulation for the present. Instead, the government will rely on existing financial laws to punish criminals engaging in Bitcoin crime, stating that while they would not be making any specific Bitcoin regulations, virtual currencies do not exist in a “legal vacuum.”
“ Accordingly, virtual currencies have no influence on the mandate of the Swiss National Bank either… Given that virtual currencies are a marginal phenomenon and are not in a legal vacuum, the Federal Council has concluded that there is no need for legislative measures to be taken at the moment.”
No Bitcoin Regulation Needed: Bitcoin Already Covered by Existing Laws
The report stated that, although the government will not be pursuing any legislation meant to specifically impose Bitcoin regulation, victimization involving Bitcoin is already protected against by existing Swiss financial law. The Swiss government cited the Swiss Code of Obligations, the Federal Act on Combating Money Laundering and the Financing of Terrorism in the Financial Sector, plus the Federal Act on Banks and Savings Banks as existing laws that already encompass Bitcoin. These laws impose restrictions on private sector financial institutions that are aimed at combating crimes like fraud, theft, and money laundering. These particular laws will be used by the Swiss government to impose Bitcoin regulation without having to write new legislation solely for the purpose of building a legal structure for virtual currencies. This decision from the Swiss government is similar to the very recent decision of the Canadian government to amend an existing financial law in order to bring virtual currencies under the authority of the Canadian financial regulatory agencies.
“contracts with virtual currencies are enforceable in principle and penalties can be imposed for criminal offences(sic) associated with virtual currencies.”
The Swiss Federal Council also cited Bitcoin’s lack of wide acceptance as another reason why the crypto-currency warrants no legislation in addition to the already standing laws in Switzerland. They said that Bitcoin is largely irrelevant, and that they expect it to remain so for the foreseeable future. Therefore, there is no need to give Bitcoin regulation much attention at all.
“The report explains that the economic importance of virtual currencies as a means of payment is fairly insignificant at the moment and the Federal Council believes that this will not change in the foreseeable future.”
While the Bitcoin economy may seem very small when compared to the global economy, or even the economic activity in a single, developed country, the Swiss government has failed to take notice of the exponential growth the Bitcoin economy has experienced in the last few years.
Within a short life of 5 years, a single bitcoin has went from being virtually worthless, to being worth several hundred dollars. At one point in late 2013, the Bitcoin price even reached a peak of more than $1000. Additionally, in the past year alone, Bitcoin has seen an explosion in acceptance by large businesses around the world. (Microsoft now accepts Bitcoin, as well as a growing number of multi-billion dollar corporations) A person can even pay for a meal at a restaurant with his or her bitcoins.
Switzerland, its government, and the SNB cannot be expected to understand the rapid growth of Bitcoin and its still largely unmet potential. They are in fact governmental institutions operating under the advice of the mainstream economists, who have no knowledge about Bitcoin whatsoever, or are deliberately trying to downplay the enormity of Bitcoin’s potential. These economists do these things because they are tasked with defending the government’s monopoly over the issuance of money, and the regulation of its supply. They also fail to realize the fact that their positivist methodologies and the policy recommendations they produce are responsible for all of the huge economic crises that have occurred since the advent of central banking.
Bitcoin Price Volatility and Risk
In addition to the statement that Bitcoin is insignificant to the mainstream economy, and that it will be so for some time, the Swiss Federal Council warned citizens against the Bitcoin price volatility and risk involved with Bitcoin. This same warning has been issued by a few central banks already. All of the central banks that have warned against the volatile Bitcoin price and security risks ignore the constant innovation and improvement being made by the Bitcoin community.
Surprisingly, unlike the other central banks, the Federal Council did not use Bitcoin price volatility and security risks as an argument to dissuade citizens from using virtual currencies. They only brought up these two things as a point of caution. The Council remained surprisingly neutral in their report, refraining from portraying Bitcoin in a negative light.
It is uncertain whether or not Switzerland will continue to be neutral on the topic of dedicated Bitcoin regulation. However, Coin Brief will watch for any changes in the decisions of the Swiss government to remain neutral, and will report on any new developments that may arise from this story.