A recent research paper published by the Bitcoin Policy Institute has suggested that central banks should consider adopting Bitcoin (BTC) as a reserve asset. The paper argues that Bitcoin can serve as a hedge against various risks, including rising inflation, geopolitical tensions, capital control risks, sovereign defaults, bank failures, and international sanctions imposed by the United States government.
The author of the paper, economist Matthew Ferranti, believes that Bitcoin is an effective portfolio diversifier due to its weak correlation with other financial instruments. He also highlights the lack of counter-party risk associated with Bitcoin, making it an attractive hedge against sovereign defaults and financial sanctions.
While Ferranti acknowledges that Bitcoin may not be suitable for every central bank, he argues that it shares similar characteristics with gold as a store of value and hedge against currency depreciation.
The paper aligns with calls from US politicians, including Presidential candidates and lawmakers, to establish Bitcoin as a strategic reserve asset of the United States Treasury Department. Former President Donald Trump even hinted at the possibility of using Bitcoin to pay off the national debt in a recent speech.
The Bitcoin Strategic Reserve Bill, introduced by Wyoming Senator Cynthia Lummis, aims to acquire 5% of Bitcoin’s total supply over time. This initiative has been praised by Microstrategy CEO and Bitcoin advocate Michael Saylor, who compared it to the Louisiana Purchase, a historic event that doubled the geographic area of the United States.
However, not everyone is supportive of the idea. Cardano founder Charles Hoskinson has expressed concerns that adopting Bitcoin as a strategic reserve asset could give state actors too much influence over the Bitcoin network.
Overall, the paper from the Bitcoin Policy Institute presents a compelling case for central banks to consider Bitcoin as a reserve asset, highlighting its potential as a hedge against various risks and its role as a store of value.