Swiss May Face a Future Referendum to Enshrine Status of Cash

(Bloomberg) -- Swiss citizens are likely to vote in a future referendum on whether to enshrine the availability of cash in the constitution after an initiative to pre-emptively guard against digital money.

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The campaigners of the ballot, a group called the Swiss Freedom Movement, this week said they had collected 157,422 signatures in support of such a plebiscite.

If officials certify the total did indeed exceed 100,000, the rules of Swiss direct democracy stipulate that a referendum must be held.

Neither the government nor central bank have voiced an intention to abolish cash anytime soon. Even so, the initiative highlights how emotive the issue of physical money is in Switzerland. Every inhabitant holds the equivalent of $11,824 in cash, the most in all economies where the Bank for International Settlements collates data.

The referendum, if it is eventually held, represents a rare instance where money preferences are tested by voters at the ballot box rather than simply through their spending habits. It may well draw interest from euro-zone central-bank officials who are currently mulling whether to advance a blueprint for digital money in the region.

“We need to change the constitution so we can retain cash as freedom for the next generation,” Richard Koller, president of the Swiss Freedom Movement, said in an interview.

He cited a “tendency toward digital currencies” that governments including Switzerland’s are likely to favor.

Most cash there — 51 billion Swiss francs ($55.3 billion) — is held in form of the largest banknote, worth 1,000 francs. That suggests that physical money is used as a store of value rather than for payments. By contrast, the most common bill in the euro area is the 50-euro note, according to 2021 data.

Cash in Switzerland is still used for most transactions, but such payments are declining. At the end of last year, 29% of transactions were settled with physical money, according to the Swiss Payment Monitor study, down from 48% in 2019.

In comparison, in digital-savvy Sweden only 8% of consumers made their last purchase with cash, according to the Riksbank.

While the SNB is investigating a digital currency for use between financial institutions, officials have repeatedly rejected a “digital franc” for settling everyday payments.

They have warned that the shift toward cashless payments worldwide bears risks. The SNB sees the supply and distribution of physical money as one of its key tasks, Vice President Martin Schlegel has said.

If 100,000 signatures are certified, government and parliament can comment on the proposed change. A referendum would then be held in two to three years.

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