"It is difficult, but not impossible..."—this is how financial and technology experts describe the potential adoption of Bitcoin as a reserve currency by central banks worldwide. However, the situation becomes even more complex for major fiat currencies, particularly the dominant US dollar.
From Early Days to a Major Disruption
From the emergence of cryptocurrencies in 2009 until 2013, the market remained relatively calm. However, Bitcoin’s massive surge in 2017—becoming the most powerful and widely recognized digital currency—sent shockwaves through traditional financial markets. This sudden rise captured the attention of investors, central banks, and governments, prompting stricter regulations. Despite these restrictions, cryptocurrencies continued to grow, with over 10,000 digital currencies now in existence.
Government Resistance and the Rise of CBDCs
After failing to curb the expansion of cryptocurrencies through regulations, central banks began exploring their own digital currencies. China took the lead by launching the Digital Yuan in February 2023. Meanwhile, the US has yet to make significant progress on a digital dollar, while Europe’s payments giant Nexi collaborates with the European Central Bank (ECB) to develop a Digital Euro.
Difficult, But Not Impossible
Hossam Taleb, a financial markets and e-commerce analyst, believes that while adopting Bitcoin as a reserve currency is challenging today, it may not be impossible in the near future.
He added that current data suggests continued expansion, forcing central banks to engage with the market, develop regulatory mechanisms, and consider its benefits—especially due to the speed and confidentiality of crypto transactions.
If cryptocurrencies were adopted as reserve assets, major fiat currencies like the US dollar and euro would face significant challenges. The dollar, in particular, is already under pressure due to geopolitical tensions and a growing trend among nations to diversify away from it in trade settlements.
The Role of Central Bank Digital Currencies (CBDCs)
A recent report by the Bank for International Settlements (BIS) highlighted that CBDCs could drastically reduce the time and cost of cross-border payments. Pilot programs showed that transactions settled in seconds—compared to the traditional 3-5 days required by banks. Additionally, CBDCs could cut cross-border payment costs by up to 50%.
The Dollar’s Weakest Phase in Decades
Goldman Sachs recently described the current period as "the US dollar’s weakest phase in recent history." Meanwhile, Morgan Stanley expects a potential rebound, despite the growing US current account deficit—now at its highest level since 2008.
Deutsche Bank AG agrees with Goldman’s bearish outlook, comparing today’s dollar trends to its decline between 2002 and 2007. However, Morgan Stanley and Horizon SLJ Capital argue that the dollar could still strengthen, as it did in the 1980s and 1990s despite fiscal deficits.
Goldman Sachs analysts suggest that investors should avoid long-term US fixed-income and equity markets, as non-US assets now offer more competitive returns—a factor that could further weaken the dollar over time.