The proposal, which wants money created by the Swiss National Bank to replace money created electronically by commercial banks, is due to be put to voters under the country's system of direct democracy.
The SNB, the parliament and the government oppose the scheme, which would make Switzerland a guinea pig for a new financial system that has never been tried elsewhere.
"Acceptance of the initiative would plunge the Swiss economy into a period of extreme uncertainty," Jordan said in remarks prepared for an address at Zurich University.
"Switzerland would have an untested financial system that would differ fundamentally from that of any other country," he added. "This would create turmoil on the financial markets even before its implementation."
Supporters of the initiative, who have gathered the 100,000 signatures needed to trigger a vote, say their proposals will make the Swiss banking system more secure and less complicated.
They say the current fractional reserve system - where banks 'create' money each time they issue loans - is unstable because it is secured by reserves representing just a fraction of the currency actually created by the central bank.
They argue that adopting their proposals would avoid dangerous asset bubbles while freeing taxpayers from the prospect of having to bail out banks which are threatened with collapse.
But Jordan said switching to sovereign money would hinder the SNB's monetary policy by requiring the central bank to manage the money supply - an idea it abandoned 20 years ago.
"Today the SNB steers monetary conditions via money market rates, a strategy which has served it well over the years," he said.
Jordan said adopting the sovereign money system would move away from the traditional separation of responsibilities among central banks and commercial banks.
The SNB would have to guarantee the supply of credit to the economy by providing commercial banks with cash. This would give the central bank a more direct influence on lending, Jordan said.
"Such centralisation is not desirable," he said. It "would be hampered by political interference, false incentives and a lack of competition in banking."
This could also restrict the supply of credit to households and companies, making borrowing more expensive.
Jordan said it would be naive to think such a system would improve financial stability, with a switch to sovereign money not preventing bubbles occurring in stocks, bonds or real estate markets caused by too much lending.
(Reporting by John Revill; Editing by Michael Shields)
By John Revill
