Switzerland Holds Referendum to Ensure Economy Never Becomes Cashless

Switzerland is close to holding a referendum to protect paper money from its digital counterpart by enshrining its status in the texts of the constitution, according to Bloomberg.

The Swiss Freedom Movement, which advocates for the ballot, announced that it had collected 157,422 signatures this week in support of the referendum.

According to the rules of direct democracy in Switzerland, if officials approve that the total number of supporters exceeds 100,000, then a referendum must be held.

Neither the government nor the central bank has announced their intention to abolish cash before. Nevertheless, the initiative highlights the extent to which people interact with the issue of money in Switzerland, where each resident owns the equivalent of $11,824 in cash, the largest amount among all economies, according to data collected by the Bank for International Settlements.

The referendum, if held, would be a rare example of testing voters' financial preferences at the ballot box, rather than just their spending habits, and could spark the attention of central bankers in the eurozone if they are considering plans to adopt a digital currency.

“We need to change the constitution so that future generations can hold cash freely,” Richard Koehler, head of the Swiss Freedom Movement, said in an interview, also suggesting that governments including Switzerland might “go digital.”

Most of the money in Switzerland is held in the largest 1,000-franc banknote, worth 51 billion Swiss francs ($55.3 billion), reflecting the use of money as a store of value rather than just payments. In contrast, the most widely used banknote in the eurozone is the 50 euro denomination, according to 2021 data.

Cash continues to be used in Switzerland for most transactions, but these payments continue to decline. By the end of last year, cash was used to complete 29% of transactions, down from 48% in 2019, according to the Swiss Payment Monitor study.

In Sweden, paper money is used for only 8% of transactions, according to Riksbank.

At a time when the “Swiss National Bank” is seeking to issue a digital currency for use between financial institutions, officials have repeatedly refused to use a “digital franc” to settle daily payments, and have warned of the dangers of shifting to digital currencies around the world, as said Vice President of the Central Bank, Martin Schlegel. The Bank considers the supply and distribution of money as one of its main functions.

If the signature of 100,000 people is approved, the government and parliament may comment on the proposed change, after which the referendum will take place within two to three years.