Bitcoin has strengthened its place as a tactical asset for reserve managers and national governments alike in recent years, but contrary to some opinions, it is still a long way from becoming a suitable global reserve currency. Even as governments in the Philippines announce initial plans to include the asset in their reserves and President Bukele sits on large unrealized gains from El Salvador’s Bitcoin holdings, the asset retains structural flaws that prevent it from dethroning the dollar or gold anytime soon. The following opinion article was written by James Murrell, a product and strategy professional at a leading crypto exchange. His experience includes over 6 years in operations, commercial strategy, and product management across a range of crypto and fintech startups. James started his blockchain journey in 2013, first entering the space in a professional capacity in 2018. First things first: why do countries hold reserves and what makes USD a global reserve currency? Global foreign exchange reserves now total $12 trillion, up from $2 trillion in 2000. These are overwhelmingly held in USD (~58%), followed by the euro at ~20%. A growing volume is also being held in gold again, particularly among emerging-market central banks, with purchases surging in recent years. While some countries accumulate reserves to manage exchange rates, their more fundamental purpose is precautionary. Reserves serve as a backstop against sudden capital flow stops and the currency depreciations that often follow. Historical episodes underscore this: from Mexico’s Tequila Crisis and the United Kingdom’s Black Wednesday to Russia’s sovereign default in the 1990s, as well as more recent cases involving China, Turkey, and Argentina. Rapid capital outflows can inflict severe economic damage. Policymakers, by liquidating reserves, can intervene to stabilize the exchange rate and mitigate this, using the foreign currency obtained from reserve sales to support their own currency. Reserve accumulation is also the natural by-product of certain economic models, particularly of those economies running current account surpluses. In China, for example, persistent trade surpluses have resulted in the accumulation of foreign exchange reserves, with excess domestic savings invested abroad. But at their core, official reserves are primarily instruments of external stability, supporting monetary and financial policy during episodes of stress. Not every asset, therefore, qualifies as a reserve asset. Reserves should be held in instruments that are safe, liquid, widely trusted, and exhibit relatively low volatility that can be deployed quickly and effectively in times of turbulence. Why Bitcoin won’t be the next global reserve currency It follows that, given the requirements previously mentioned, Bitcoin won’t become the next global reserve currency soon. It lacks the backing of a large, stable economy, is rarely used for trade invoicing, and falls far short of the depth and liquidity provided by sovereign bond markets, like the U.S. Treasury market. Despite gains, broad-based public trust remains limited, and the powerful network effects of the existing reserve system make displacement highly improbable. To add context, the U.S. Treasury market, one of the principal destinations for reserve holdings, has a daily trading volume roughly 70x greater than Bitcoin and a market capitalization about 25x larger. Bitcoin’s annualized realized volatility also typically ranges between 50% and 100% (150%+ in moments of stress), compared with the U.S. 10-year Treasury note, which historically exhibits annualized volatility of about 5–8%, and even lower for shorter maturities. In terms of market structure, Bitcoin also lags behind sovereign debt markets. It features wider bid-ask spreads, shallower order books, and fragmented trading venues, alongside lower levels of institutional participation. This makes Bitcoin less attractive to FX reserve managers, who prioritize these qualities when allocating assets. The scale of interventions illustrates this: in 2022, Japan’s Ministry of Finance (MoF) spent about USD 60 billion to defend the yen, while in 2024, interventions totaled nearly USD 100 billion. If such operations had been executed in Bitcoin, the selling pressure would likely have destabilized the market to the detriment of both reserve managers and private holders. By contrast, the use of U.S. Treasuries and other liquid government bonds allowed Japan to intervene efficiently, without impairing market functioning over the long term. Nevertheless, there remains a logical place for Bitcoin The view taken by many senior politicians, including ECB President Christine Lagarde, that there should be no inclusion is also unproductive; categorical opposition not only reinforces the mutual disdain that often colors exchanges between policymakers and the crypto community, but also overlooks the potential value Bitcoin can offer. Most notably, Bitcoin provides diversification in a world of rising geopolitical fragmentation. Trade barriers are at their highest in decades; capital controls are again being discussed in major capitals that once championed openness; sanctions have become almost a routine tool; and even long-standing security arrangements now look less stable. Here, sovereign counterparty risk has increased, even among aligned nations. At the same time, the global buildup of debt raises questions about whether sovereign bonds are as risk-free as they are often assumed to be. Bitcoin would not be immune to global geopolitical shocks, but unlike sovereign debt, it carries no country-specific risk premium. Its value does not rest on the creditworthiness or foreign policy decisions of any single government, precisely because it is not issued by one. A second reason for considering Bitcoin in reserve portfolios is that it can serve as a complement to gold, which is an asset already widely held by central banks. Bitcoin is not yet regarded as equally safe, although younger generations increasingly see it that way. Still, Bitcoin shares important features with gold: both are scarce, yieldless in their native form, and valued primarily as stores of value rather than for their intrinsic use. Yet Bitcoin has notable advantages. It is easier to transfer, store, and divide than gold, and counterfeiting is virtually impossible. Gold, by contrast, requires physical examination and custody checks. Bitcoin’s central role in the broader crypto ecosystem should also support increased institutional acceptance, particularly as regulation continues to mature, from Europe’s MiCA framework and emerging U.S. stablecoin rules to global standards like the OECD’s CARF and new legislation such as FIT21 in the U.S. This institutionalization of crypto leads to the final point. Official reserves are traditionally managed conservatively, emphasizing safety, liquidity, and immediate usability in times of crisis, but clinging too tightly to tradition can also be counterproductive. The crypto ecosystem has demonstrated resilience to both internal and external shocks and won’t disappear. Bitcoin, as the original cryptocurrency and benchmark reserve asset of the crypto ecosystem, anchors this system. Increasingly, institutional investors and asset managers have incorporated Bitcoin and other digital assets into their portfolios. Examples include BlackRock and Fidelity offering spot Bitcoin ETFs, and major hedge funds trading crypto derivatives. This adoption strengthens the case for governments to acknowledge Bitcoin’s role and consider its inclusion in reserve management strategies. A bold new future Skepticism toward disruptive innovation is not new. It took time for firms to move from on-site servers to cloud computing, for trading to migrate from physical pits to electronic platforms, and for reserve managers to diversify away from gold after World War II. The shift toward U.S. Treasuries was initially met with hesitation, yet Treasuries are now the backbone of global reserves. Bitcoin will not replace the current reserve assets, but it can serve as a complementary asset, offering diversification and modernization in reserve portfolios.