Will Switzerland’s Central Bank Tokenized Stock Be Traded on Ethereum? – Trustnodes

Will Switzerland’s Central Bank Tokenized Stock Be Traded on Ethereum?


Swiss central bank

The central bank of Switzerland is very uniquely tradable on the SIX Swiss exchange and has been traded there since 1907 when it was formed.

Unlike other central banks full of secrecy regarding their shareholders, usually a combination of gov and commercial banks, the Swiss one has its books open.

Around 40% of it is owned by the Canton, that being the Swiss government. About 11% is owned by the cantonal banks, this being 27 commercial banks that are owned by the Swiss government.

The rest of the 100,000 shares at a nominal price of 250 Swiss franks each, worth about $250, are owned by you and me, if we wanted to as anyone can buy them on the stock exchange like any other company stock.

Due to its special nature the private shareholders’ voting rights are limited to 20%. So the ordinary public can have some direct input on how the bank is run, but no where near a total input like for other publicly traded companies.

Still 20% is better than none, which the Bank of England gives to the British public, or the Federal Reserve Banks give to the American public.

What all three have in common is that private shareholders are limited to just 6% in dividends, that being 15 franks per share as that’s the 6% of 250, or about $1 million a year.

Pretty much nothing, but that hasn’t stoped their stock price from skyrocketing, acting a bit like bitcoin in recent year.

Swiss central bank stock price, July 2020
Swiss central bank stock price, July 2020

Yup, we even have the sideways there and the little pumps in 2015 and 2016, seemingly one year behind bitcoin, making that potentially very interesting in itself for academic study.

“The SNB’s 2019 annual financial statements closed with a profit of CHF 48.9
billion, following a loss of CHF 14.9 billion in 2018. This result was primarily
attributable to the profit on foreign currency positions.

The allocation to the provisions for currency reserves amounts to CHF 5.9
billion. After taking into account the distribution reserve of CHF 45.0 billion, the net profit comes to CHF 88.0 billion.

This allows a dividend payment of the legally stipulated maximum amount of CHF 15 per share. According to the profit distribution agreement between the SNB and the Federal Department of Finance (FDF) for the 2016 – 2020 period, the Confederation and the cantons are entitled to a distribution of CHF 2 billion as the distribution reserve exceeds CHF 20 billion.”

They apparently made too much money however, so they gave gov another $2 billion (4 billion franks in total), with some $80 billion sent to the money making machine:

“At the end of 2019, the SNB’s assets amounted to CHF 861 billion, compared
to CHF 817 billion one year earlier.

This increase was mainly due to valuation gains on foreign currency investments and gold.

Total currency reserves stood at CHF 836 billion at year-end. The majority of these reserves was held in the form of foreign currency investments, the remainder in gold.”

No bitcoin? As a global currency asset, bitcoin is a lot more responsive than gold to fiat price movements, so it may well be time for the central bank to at least consider it.

“Measured in Swiss francs, the return on currency reserves was 6.1%. Returns on gold and foreign exchange reserves were positive, at 16.3% and 5.5% respectively,” they say in their 2019 annual statement published earlier this year.

“It should be noted that the constitutional and legislative authorities have
deliberately not tasked the SNB with using its asset management activities to selectively influence the development of certain economic sectors.

The SNB’s investment policy therefore cannot be geared to pursuing structural policies, i.e. advantaging or disadvantaging specific economic sectors via positive or negative selections.

In order to remain as neutral as possible, the SNB replicates the individual stock markets in their entirety, taking into account the aforementioned exceptions.

As a result, the SNB holds equities in the various economic sectors based on market capitalisation.”

About 80% of their close to $1 trillion investment is in bonds. The other 20%, which amounts to pretty much the current total crypto market cap, is in stocks, distributed between large cap, medium cap, small ones too, and advanced economies as well as emerging markets.

Yet no bitcoin or eth despite claiming no positive or negative discrimination which is understandable because it’s a very new asset class and not something our great grandpas could have foreseen in 1907, but you’d expect the current grandpas to at least start thinking about it.

Because although they say no positive or negative discrimination, which is a very fine principle in general, this $1 trillion may look more as basically our investment fund, Switzerland’s slush fund.

And of course we can’t just spend it, but maybe some of it like 20% should be used on risky endeavors like flying cars, and then the other 80% can be this communistic no passing judgment between sugary Coca Cola and bitcoin or SpaceX and IBM to make this even more granulated.

In addition it is quite unacceptable they do not have a full breakdown on their annual report of what stock they hold exactly and what bond, instead of giving just a % distribution between stocks and bonds.

This is the public’s money, and of course the public should know what exactly is being done with it and should be able to very easily find this information.

Since the public owns all of the stock for this bank, both selectively through the stock exchange market and more generally through their own government, it might take less time for this bank to modernize.

Whether they want to or not, they will most likely eventually be forced to modernize where their stock trading on ethereum is concerned because facilitating it through synthetics even right now would be a child’s play as all you need is some lines of code and a price feed from SIX – freely available – to basically effectively tokenize this stock although without dividends or voting rights, both in this case negligible where most investors are concerned.

For other aspects it might be more difficult to digitize the bank in a way that all its actions are effectively public actions so its owners can have a constant audit.

“In 2019, on behalf of and for the account of the Confederation, the SNB issued money market debt register claims amounting to CHF 21.0 billion and Confederation bonds amounting to CHF 2.1 billion.

The SNB also carried out roughly 187,000 payments on behalf of the Confederation,” they say.

Presumably these debt claims were through commercial banks where thus the public gets lost in a haze as we can’t see the ledger of those banks.

Likewise these close to 200,000 payments are probably not listed somewhere with the bank very easily able to do so even on its own website.

As the digital age is still very new however, and really just in the early 2000s was dismissed by plenty as some gimmick, the slowness of attitude change despite the established principles supporting it, is understandable.

It is most likely for example that any genuine member of the public can go and see the paper list of these 200,000 transactions. Something thus which establishes the principle and the right to transperancy.

So it is not necessarily legal constraints but more attitude constrains in seeing form – paper or digital – rather than substance, whether transparent or secretive.

If there is a good reason for the latter, and there can be cases when there are good reasons, then there can be fully understanding of it.

But if there are no such good reasons, then it is difficult to see why there shouldn’t be the utmost transparency to facilitate not just accountability, but also input in regards to what are very difficult decisions and at times can be even of the flip a coin sort.

Therefore it is probable, as unlikely as it may seem, that we will see and in perhaps even less than within a decade, the engagement of the public ledger and a ledger that is run by the public.

That’s especially for countries like Switzerland, but maybe even Sweden and other countries that are sufficiently civilized and sophisticated to understand they are ultimately the public and the public is them.