Bitcoin As Strategic Reserve: Long-Term Implication On Government & Retail Participation

As the US spearheads the global emphasis on Bitcoin and its role in alternative finance, this creates a unique opportunity for the rest of the world.

By Roshan Aslam

Since Donald Trump returned to the Oval Office, the growing emphasis on Bitcoin by the US has been replicated throughout the world. Trump’s recent executive order to create a Bitcoin strategic reserve arguably highlights the pinnacle of recognition for this new-age asset, as it has transformed into a geopolitical tool, going beyond its usual identification of a niche investment. As the order comes into force, governments and central banks worldwide have begun manoeuvring to replicate the move, as discussions and similar developments take place globally that offer to create an alternative economy.

This deployment of a Bitcoin strategic reserve is a significant milestone, as its impact goes beyond the usual school of thought, influencing governments, central banks and retail traders alike. In a nutshell, the creation of the Bitcoin strategic reserve challenges the status quo of conventional assets like gold, and as Trump would put it, retail participation is expected to witness a significant uptick in adoption.

As the US spearheads the global emphasis on Bitcoin and its role in alternative finance, this creates a unique opportunity for the rest of the world and in the Indian context, catching the momentum becomes more integral. With one of the highest Bitcoin adoption rates in the world and hosting one of the largest youth populations in the world, India is positioned to undertake a leadership role in shaping government and retail participation in Bitcoin, especially with efforts to create legislation to support it.

Sequential Impact

As the US adopts Bitcoin at the highest possible level, this development is compelling other countries to replicate it similarly. It’s not only FoMo, but the stakes remain higher than previously anticipated. While there have been countries like Bhutan and El Salvador whose governmental participation in Bitcoin has been continuing for quite some time, this move by the US positions it to become the primary stakeholder in the coming years. With early adoption, the US can get a strategic advantage, an aspect that is well-identified by other countries. 

This is why nations like Brazil, Argentina, Japan and Switzerland are actively making efforts to create a similar reserve of their own. This race is similar to what humankind has witnessed repeatedly over thousands of years, with the most recent being during the Cold War when an arms race was prevalent throughout the world. Bitcoin, at the pinnacle of its capabilities, offers something greater and more valuable than mere arms, as it creates an alternative to conventional finance with DeFi (Decentralised Finance), transforming the entire outlook on modern finance. Nations that do not align with this comprehensive shift risk staying back in a global transformation of finance and a similar notion has been witnessed even during the beginning of the industrialisation phase with oil.

Apart from the aforementioned countries, nations like Russia, Germany and Poland are actively undertaking steps to integrate Bitcoin into their economies. For instance, Russia is actively trading in Bitcoin in its oil trade, Germany recognised Bitcoin as a financial instrument way back in 2013, Poland created Bitcoin ATMs throughout the country and more. As governments adopt Bitcoin across levels, this emphasis demonstrates a changing narrative for global finance where limiting tools like sanctions become invalid. This new financial and economic framework remains at a nascent stage, but the competition remains open about who gets the clear advantage. 

Impact On Retail Participation

One of the major roadblocks to significant retail participation in Bitcoin around the world has been its lack of status as a legal tender. As governments actively participate in Bitcoin, this provides a sense of legitimacy and credibility to new retail traders. This has the potential to significantly contribute to enhancing retail participation in BTC around the world, especially in third-world countries with high inflation rates and unstable currencies. Furthermore, the legitimacy received from governmental participation can act as a safety net, which can provide an added layer of security to new traders and contribute to enhancing the new-age economy.

These aspects have already been witnessed in countries that adopted Bitcoin early, such as Bhutan. With one of the largest Bitcoin reserves in the world, the population of this small Himalayan kingdom is no stranger to the economic prosperity offered by this financial tool and enjoys one of the highest adoption rates in VDAs (Virtual Digital Assets). While it can be considered a pilot project, the impact of the same would be immense for the global population. 

Future Outlook

While it is clear that Trump’s executive order to create a Bitcoin strategic reserve is a milestone in the asset’s journey so far, the true extent of its impact will continue to unfold in the future. The world still has limited information on the functionality of this reserve, as well as how it will be managed, or what is the predetermined utilisation of these assets in the long term. However, this is being considered a highly positive move from the US, one that has the potential of comprehensively changing how BTC is perceived as an asset. 

While it looks like an opportunity from different angles for retail traders, they should make their own analysis of everything that is happening before being influenced by an external factor and making investment decisions. Keeping up to date regarding Bitcoin, governmental and retail participation and its long-term future must be recognised as primary concerns before entering the space. For the Indian context, legislation from the Indian government could also be one of the enablers for the population, and can become critical for long-term value creation aspirations.

(The author is the Co-founder & CEO of GoSats)

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