TL;DR

Fidelity warns that countries face greater risks by ignoring Bitcoin than by adopting it, especially in a changing financial environment. 
The 2024 “Bitcoin Act” proposes that the U.S. reserve up to one million BTC over the next five years, highlighting its strategic importance and potential long-term benefits.
Countries like Bhutan and El Salvador are reaping significant benefits with early Bitcoin adoption strategies, setting a global precedent and encouraging other nations to follow suit. 

In a recent report, Fidelity Digital Assets issued a strong warning: nation-states that ignore Bitcoin may face more severe risks than those that embrace it. According to analyst Matt Hogan, while some governments have acquired Bitcoin indirectly, through seizures related to illegal activities, few have implemented clear strategies to include the cryptocurrency in their strategic reserves, potentially missing out on its long-term benefits.

Currently, countries like the United States, China, Ukraine, Bhutan, and El Salvador are among the leading Bitcoin holders at the government level. In particular, the U.S. holds approximately 198,109 BTC, valued at $20.171 billion, primarily acquired through legal cases such as the Silk Road. However, these holdings have not been officially integrated into their strategic reserves due to regulations that require auctioning seized assets, creating limitations on their potential use.

Bhutan and El Salvador: Inspiring Case Studies

Fidelity suggests that the success of Bhutan and El Salvador could pave the way for other countries to adopt Bitcoin. Both nations have achieved significant returns after adopting Bitcoin into their economic policies. In the case of El Salvador, its decision to make Bitcoin legal tender in 2021 has attracted foreign investment and generated substantial gains due to the rise in Bitcoin’s value since then, demonstrating the potential advantages of early adoption.

On the other hand, in July 2024, U.S. Senator Cynthia Lummis introduced the “Bitcoin Act,” a bill aimed at authorizing the Treasury Department to acquire up to 1 million BTC over the next five years. According to the plan, these reserves would be held for at least 20 years as a strategy to protect against inflation, potentially mitigating long-term financial risks, and strengthen the dollar’s stability.

Despite these initiatives, Fidelity highlights a crucial point: many countries are likely accumulating Bitcoin in secret. According to Hogan, revealing these strategies would drive up demand and, in turn, prices, reducing their ability to acquire Bitcoin at competitive prices. This secret accumulation could be a key factor in shaping the future dynamics of the global economy.

With the growing adoption of Bitcoin among countries and private entities, 2025 could mark a turning point in how nation-states approach this cryptocurrency. Will Bitcoin become the new “digital gold” in global strategic reserves, influencing the future of financial systems worldwide? The answer is yet to be written.

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Filed under: News - @ January 8, 2025 12:32 pm