Bitcoin as a Strategic Reserve Asset: A Growing Global Trend
Hatchworks has put together an insightful article exploring the potential of Bitcoin (BTC) being incorporated into national Strategic Reserve Assets (SRA). This article will break down what an SRA is, why governments might consider adding BTC to their reserves, and the key qualifications that could make Bitcoin eligible. Additionally, we will examine the challenges Bitcoin may face and discuss the evolving roles of Central Bank Digital Currencies (CBDCs) and Bitcoin in the future financial system.
What is a Strategic Reserve Asset (SRA)?
Strategic Reserve Assets (SRA) are financial assets held by governments or central banks to support national currencies, mitigate economic shocks, and promote financial stability. Traditionally, SRAs consist of gold and major fiat currencies, such as the U.S. dollar, as they provide liquidity and act as a financial safety net during periods of geopolitical instability or global economic downturns.
Recently, Bitcoin (BTC) and other digital assets have been gaining attention as potential additions to SRAs. Given Bitcoin’s decentralized nature and limited supply, it has emerged as a strong candidate for strengthening and diversifying a nation’s reserve holdings.
Key characteristics of an effective Strategic Reserve Asset:
- Store of Value: The asset must maintain purchasing power, particularly during economic instability or periods of quantitative easing (QE).
- Liquidity: It should be easily convertible into cash or other assets without significant price fluctuations.
- Global Recognition: The asset should be widely accepted and utilized worldwide.
- Risk Diversification: It should help hedge against inflation, currency devaluation, and other financial crises.
Bitcoin’s rise as a Store Of Value
Over the past decade, Bitcoin (BTC) has consistently outperformed traditional assets, solidifying its reputation as a store of value-often referred to as ‘digital gold.’ Bitcoin (BTC) shares key characteristics with gold, such as scarcity and protection against monetary debasement. As we move into 2025, Bitcoin’s role as a reserve asset could become even more pronounced, with more investors and governments exploring its potential to reinforce their Strategic Reserve Assets (SRA).
Bitcoin vs Gold: Insights from Coinbase CEO Brian Armstrong
Speaking at the World Economic Forum (WEF) in Davos, Coinbase CEO Brian Armstrong emphasized Bitcoin’s superior utility compared to gold. He also highlighted that Bitcoin has been the top-performing asset over the past decade:
- Easier Transferability: Unlike gold, which requires physical transportation and storage, Bitcoin can be transferred across borders within minutes at minimal cost, making it more practical in a global financial system.
- Transparency & Auditability: The Bitcoin blockchain offers full transparency, enabling institutions and governments to verify their holdings at any time.
- Portability: Bitcoin (BTC) can be stored on hardware wallets, secure exchanges, or even memorized as a seed phrase, allowing individuals and institutions to move wealth without relying on intermediaries.
Why Goverments might add Bitcoin to their Strategic Reserves Assets
The concept of Bitcoin (BTC) as a reserve asset is no longer theoretical. In 2021, El Salvador became the first country to adopt Bitcoin as legal tender and integrate it into its national reserves. As of today, El Salvador holds 6,045 BTC, valued at approximately $636,200,000 according to https://bitcoin.gob.sv/ .
With Donald Trump, the most crypto-friendly U.S. president, taking office, it may not be long before the United States considers adding Bitcoin to its reserves. Initially skeptical, Trump later acknowledged Bitcoin’s potential as a strategic asset and proposed that adopting BTC could help hedge against U.S. dollar devaluation and rising national debt, which now exceeds $36.2 trillion. Should the U.S. make this move, other nations may follow suit, accelerating global cryptocurrency adoption.
On January 23, 2025, Donald Trump signed a landmark executive order on cryptocurrency:
- Creation of the Presidential working group on digital asset markets:
The executive order establishes this group to enhance U.S. leadership in digital finance. Its primary objective is to develop a comprehensive federal regulatory framework for digital assets, including stablecoins, while evaluating the creation of a strategic national digital assets stockpile. - Leadership and Composition:
The Working Group will be chaired by the White House AI & Crypto Czar, David Sacks, and will include the Secretary of the Treasury, the Chairman of the Securities and Exchange Commission (SEC), and leaders from other relevant departments and agencies. - Engagement with industry experts:
To ensure informed decision-making, the AI & Crypto Czar will collaborate with leading experts from the digital asset and financial technology sectors, incorporating insights beyond those within the federal government. - Regulatory review and recommendations:
The executive order directs federal departments and agencies to identify existing regulations and actions affecting the digital asset sector and recommend modifications or rescissions to the Working Group. This step aims to eliminate outdated or restrictive policies that hinder innovation. - Prohibition on CBDC implementation:
The order explicitly prohibits federal agencies from taking any actions to establish, issue, or promote central bank digital currencies (CBDCs). - Revocation of prior policies:
The executive order rescinds the previous administration’s Digital Assets Executive Order and the Treasury Department’s Framework for International Engagement on Digital Assets. These earlier policies were criticized for suppressing innovation and undermining U.S. economic liberty and global leadership in digital finance.
This comprehensive executive order signals a bold step towards positioning the United States as a global leader in the digital asset economy while fostering innovation and protecting economic freedom.
Challenges of Bitcoin as a Strategic Reserve Asset
While Bitcoin (BTC) has strong potential, several key challenges could slow its adoption as a reserve asset:
- Volatility: Bitcoin’s price fluctuations remain a major concern for governments considering it as an SRA.
- Cybersecurity risks: Governments must ensure secure storage to prevent wallet hacks or cyberattacks targeting national Bitcoin holdings.
- Environmental Concerns: Bitcoin’s Proof-of-Work (PoW) mechanism consumes significant electricity annually. However, renewable energy solutions for mining are improving.
- Regulatory Uncertainty: Governments are increasingly active in regulating crypto, with frameworks such as MiCA (Markets in Crypto Assets) in Europe shaping the legal landscape.
Despite these hurdles, Bitcoin’s inclusion in national reserves is a growing trend. As regulations evolve and adoption increases, its role as a strategic asset is likely to strengthen.
Source: https://cryptorobotics.ai/news/bitcoin-national-reserves-global-trends-challenges/
Source: https://archway.finance/blog/strategic-bitcoin-reserve-state-financial-stability
Central Bank Digital Currencies (CBDCs) vs. Bitcoin (BTC): The future of finance
As noted in a 2020 article by Hatchworks, Bitcoin’s (BTC) potential as a strategic reserve asset (SRA) is not the sole focus of government exploration. They are also actively developing Central Bank Digital Currencies (CBDCs). These digital currencies, backed and controlled by central banks, aim to enhance efficiency, stability, and monetary policy implementation.
However, CBDCs and Bitcoin (BTC) serve fundamentally different roles:
- CBDCs: Designed for everyday transactions, they offer price stability but remain centralized and controlled by governments.
- Bitcoin: Functions as a decentralized store of value, offering financial sovereignty and protection against currency devaluation.
While CBDCs might replace physical cash, Bitcoin’s scarcity and decentralization ensure it will remain a hedge against economic uncertainty. As the financial landscape evolves, a hybrid system where CBDCs facilitate payments and Bitcoin (BTC) serves as a long-term reserve asset could emerge.
Hatchworks takeaway
Bitcoin’s potential inclusion in national reserves is gaining momentum, but challenges remain. Its volatility, regulatory scrutiny, and energy consumption present obstacles to widespread adoption. However, as governments navigate financial instability, Bitcoin’s decentralized, secure nature continues to attract attention. Can it cross the Rubicon?
The future of Bitcoin (BTC) as a strategic reserve asset depends on regulatory frameworks, technological advancements, and global economic trends. If these challenges are addressed, we may see Bitcoin playing an integral role in the world’s financial stability and economic sovereignty.
The question is not if Bitcoin (BTC) will be part of national reserves, but when.
The Hatchworks Team
Disclosure: Hatchworks is an investor in a range of equities, gold, bonds, bitcoin and other assets on a proprietary basis. The information provided in this document is not investment advice nor is it a solicitation to invest in any asset. For webinar, social media appearances you may send an email to info@hatchworksvc.com.
