The Swiss National Bank increases Strategy shares as Bitcoin mandates

The Swiss National Bank (SNB) purchased 50,720 additional shares of Strategy, a transaction worth roughly $9 million at approximately $180 per share. This 7% increase brings the bank’s total stake to 766,100 shares valued at about $138 million. This purchase follows a pattern where the SNB increased its position from 46,600 shares to 468,200 shares on September 30, 2024. SNB President Martin Schlegel rejects direct Bitcoin holdings because the asset’s volatility and liquidity profile conflict with the mandate to preserve the real value of reserves. He describes Bitcoin as "basically software" that carries technical risks.

The SNB’s indirect accumulation happens as the Bitcoin Initiative campaign officially ends. Organizers collected about 50,000 signatures, which is only half the 100,000 signatures required to trigger a national referendum to amend Article 99 of the Federal Constitution. The proposal sought to require the SNB to hold Bitcoin alongside gold and foreign-currency reserves. Supporters argued Bitcoin serves as a neutral asset to hedge against the concentration of reserves in US dollar and euro denominated assets, which make up roughly three-quarters of the SNB’s foreign-currency holdings.

Zug and Lugano drive local crypto adoption

Canton Zug plans to allow citizens and companies to pay up to 100,000 CHF in Bitcoin or Ether starting next February. The canton works with the Zug-based broker Bitcoin Suisse to convert these payments into Swiss francs for the tax office. Zug does not allow partial payments in cryptocurrency, so the amount must match the tax invoice exactly. I find the lack of flexibility regarding partial payments a significant hurdle for users.

Lugano pursues a different path through the Plan B initiative, a partnership with Tether to integrate blockchain into the city. The city allows residents to pay all municipal charges, such as taxes, fines, and naturalisation fees, with Bitcoin and USDT. Lugano imposes no upper limit on these payments. This differs from Zug’s 100,000 CHF cap. Lugano’s Plan B relies on the Bitcoin Lightning network to complete transactions in 4 to 6 seconds.

The Plan B initiative includes several financial components:

• A 100 million CHF investment to attract blockchain startups.
• A 3 million CHF fund to help local businesses adapt to crypto payments.
• The 3Achain institutional blockchain platform for financial transactions.

Lugano’s Mayor Michele Foletti aims to make Bitcoin part of everyday life. The city currently has nearly 400 merchants accepting Bitcoin, USDT, or LVGA. This includes large chains like McDonald’s.

Swiss pension funds manage alternative assets

Swiss pension funds maintain high allocations to real estate, with an average of 27% of total portfolios. This exceeds the 7.5% found in Dutch pension funds and the 5.6% seen in the UK. Legislation allows a maximum real estate quota of 30%. Many funds must rebalance if they hit this limit.

Pension funds also hold alternative assets, which have a 15% statutory limit. The capital-weighted average allocation to alternative assets stood at 9.7% at the end of 2023. This category includes infrastructure and private equity. Infrastructure allocations grew from 1.4% in 2014 to 2.5% in 2023. Private equity accounts for 4.4% of the average portfolio.

The composition of these assets changed significantly over the last decade. While infrastructure and private equity grew, commodity and hedge fund allocations fell. The average commodity allocation dropped from 1.9% in 2012 and 2013 to 1.0% at the end of 2023. Hedge fund allocations fell from a peak of 3.4% in 2007 to 1.1% recently. Will the SNB continue buying Strategy shares despite its official stance on volatility?