Central Bank Reserves: Bitcoin vs. Gold?

Over the past two decades, central bank reserves have undergone profound changes as ideologies have been renewed. Dedollarization is gradually establishing itself as a marker of the decline of the United States, while sovereign assets occupy a growing place, symbolizing the transition to a new world. While the appeal of gold continues to grow (still the second-largest asset in the reserves of monetary institutions), bitcoin is now attracting increasing interest. Long seen as a purely speculative asset reserved for individual investors, it is now being studied by governments in every corner of the globe. If its place in the international financial system is to grow, however, it cannot match that of gold.

Trump's arrival in power continues to have an electroshock effect. In the space of a few weeks, the American president has stepped up his declarations aimed at making the United States the crypto-currency capital of the world. He is now even considering the creation of a national bitcoin reserve, which would represent nearly 5% of total reserves. A presidential decree has been signed to study this possibility, with the aim of “protecting against inflation”. Beyond this official argument, this position remains implicitly motivated by the ambition to make the United States a leader in the field. The aim is to be ready, if need be, to initiate a transition that would maintain American financial dominance without the dollar. The idea of backing a portion of national reserves with a digital asset that can act as a decentralized currency, limited in quantity, is in effect a strategy for maintaining the status quo. This would enable the United States, already the world's largest holder of gold, to retain a dominant position in the holding of strategic reserves. And thus financial power over the world's other powers, particularly if an international conference to overhaul the international monetary system were to be held - along the lines of Bretton Woods in 1944.

In parallel with the gold craze, the idea of using bitcoin as a reserve has been gaining momentum in recent weeks. Interest in the world's leading crypto - often referred to as “digital gold” - intensified after Trump's announcements. When the world's leading power sets the pace, other countries follow suit, for fear of falling behind... The Czech Republic, for example, is considering including this crypto-currency in its reserves (despite opposition from the ECB) and could allocate up to 5% of its stockpile to it, i.e. around $7 billion. Switzerland, for its part, has already adapted legislation to allow its integration into the Swiss National Bank's reserves, in keeping with the country's tradition of financial independence (in addition to being one of the world's leading places for gold and silver storage, Switzerland remains the seventh largest holder of gold in the world). More surprisingly, Germany is also exploring this option. The former finance minister recently suggested that the Bundesbank and ECB should consider bitcoin as a way of reducing their dependence on the dollar (although Berlin is well known for its Atlanticist alignment).

This attraction also -and above all- comes from the new powers, which are massively de-dollarizing and buying gold in abundance. Following Trump's model and line, Polish presidential candidate Sławomir Mentzen is proposing, among other things, the creation of a strategic reserve in bitcoin. Poland was also officially the top gold-buying country in 2024, with almost 90 tons purchased. Russia is also getting in on the act: it is already using bitcoin for certain international transactions, and many major Russian companies are exploiting it for their commercial exchanges. Meanwhile, the country has continued to accumulate gold over the past year, and remains the fifth largest holder in the world. Finally, in China, Hong Kong is studying the integration of bitcoin into its financial reserves with the same objective, bearing in mind that the country is establishing itself as a leader in the gold and silver markets. The country, the USA's main economic rival, is also continuing to reduce its exposure to US bonds, to such an extent that its holdings of Treasuries have reached their lowest level since 2009.

These profound changes are not without consequences. In Europe, they are giving rise to considerable concern, not on the part of governments, but on the part of European institutions. The European Union fears being marginalized in tomorrow's world, and is looking for new solutions. The ECB, the financial representative of the Old Continent, is worried that eurozone citizens will turn away from traditional institutions in favor of gold and crypto-currencies. This would have the mechanical effect of reducing the revenues of European banking establishments, and therefore the potential for investment, at a time when political initiatives in this area are multiplying (notably the capital markets union). Moreover, it would only fuel speculation without supporting the stability of the euro. The lack of liquidity, poor security and the use of bitcoin for illegal activities are all factors that the ECB highlights. To counter this, it is stepping up several projects: on the one hand, it is seeking to develop a platform for settling transactions in central bank money linked to the Target system, a platform that would facilitate payments in central bank money. On the other, it wants to create a blockchain-based payment system to create the conditions for a digital euro - a project it has been working on for several years. This currency would function as an online wallet guaranteed by each national central bank and even accessible to the non-banking, albeit limited in amount and without remuneration. At a time when Trump's executive order prohibits the US Federal Reserve from issuing a digital currency, and when emerging countries are accumulating gold at a historic pace in preparation for tomorrow's international financial system, the ECB is taking the opposite tack...

As interest in bitcoin grows in advanced economies, the debate over its role in the international financial system is set to intensify - in the wake of the one that has been going on around the world. Once seen as a purely speculative asset, bitcoin is now being closely scrutinized by central banks and institutions of all kinds. With this recognition, it could attract more capital, prompting international investors to position themselves in its favor. This dynamic would reinforce its value, benefit all countries that have chosen to adopt it, and encourage other nations to adopt similar strategies.

The attraction of bitcoin, however, remains correlated with the very strong current demand for gold. These two assets possess the most sought-after values today: while progressive deglobalization encourages decentralization, the identity crisis spawned by globalization creates a profound need for freedom, both on an individual and national scale. Like gold, bitcoin embodies both these values. So it's hardly surprising that when demand for gold rises, so does demand for other sovereign assets like bitcoin. 

However, this correlation will not allow bitcoin to supersede gold in either the short or long term. Gold is still the metal that has been used for trading transactions for millennia, and can truly play the role of currency. What's more, it doesn't suffer from the same volatility as bitcoin and crypto-currencies more generally. After rising sharply in the wake of Trump's rise to power, the market has been retreating for over a month now, as a lull has gradually set in. Last but not least, bitcoin has no physical backing, making it an asset subject to an obvious time constraint, unlike gold.