Profoundly reserving the future: Bitcoin Strategic Reserve

In a surprising turn of events, U.S. Senator Cynthia Lunmis (Wyoming) announced legislation for a strategic Bitcoin reserve at Bitcoin 2024. Trump went one step further announcing a Bitcoin and Crypto advisory council to support government with the right to self-custody enshrined in modern societal practice and as an international geopolitical offensive. These incredible and bold moves has embolden Bitcoin and crypto ecology. The societal and transformative implications of such developments are vast, signalling potential shifts in how governments view and interact with digital currencies. However, New Zealand is taking a different approach.

The growth of Bitcoin in terms of its share of global wealth has been notable since its inception. As of April 2024, Bitcoin accounted for about 0.3% of the world's total wealth, with a market value exceeding $1.39 trillion​ (Investopedia)​​ (3Commas)​.

"If we combine Bitcoin with Litecoin, Monero, Ethereum, and all other cryptocurrencies, the total value comes to roughly $2.6 trillion (on April 10, 2024). That was about 0.56% of the value of all money."

CoinMarketCap. "Today's Cryptocurrency Prices by Market Cap."

This represents significant growth from its earlier days and a major opportunity, reflecting the upside respective of Bitcoin's and Crypto’s increasing wealth acceptance and value within the global financial system.

Initially, Bitcoin's distribution was heavily skewed towards early adopters and miners, but over time, the wealth distribution has become more equitable as the cryptocurrency has gained broader adoption​ (3Commas)​. This evolution highlights Bitcoin's potential to democratize financial systems, although it still faces challenges related to market concentration and volatility. Overall, Bitcoin's impact on global wealth distribution, backed by rising to be the 9th   top asset in the world, underscores its transformative role in freedom to express commerce and societal concerns as well the financial landscape, despite the complexities of such transformation, yet dwindling debate surrounding its broader adoption and utility.

Establishing a strategic Bitcoin reserve represents a modern alternative hedge against economic instability, similar to gold reserves. This move, arguably, signals recognition of Bitcoin as a significant financial asset, potentially stabilising the economy during financial crises by offering a decentralised and inflation-resistant store of value.

A U.S. Bitcoin reserve, being the same opportunity for any nation for that matter, arguably strengthens the country's position in a complex global financial landscape awash with geopolitical currency divergence , ensuring it remains competitive as digital currencies become more mainstream. Where CBDC’s entrench the same bad facets of debt-based fiat currencies, this approach attract international investments and boost economic growth, positioning the U.S. as a leader in the digital financial revolution.

In terms of Financial Inclusion and Innovation, increased adoption occurs as legislative support for Bitcoin continues to accelerate in concern with acceptance across various sectors, promoting financial inclusion. Unbanked and underbanked populations, in the crypto paradigm, gain access to financial services through Bitcoin, bridging gaps in the traditional banking system and fostering economic equality while avoiding the control implications of CDBCs.

Government backing will continue to spur innovation in blockchain technology, encouraging startups and established tech companies to explore new applications. This will lead to advancements in various fields, from finance to supply chain management, enhancing efficiency and transparency. The real question though is does introduction of legislation really necessitate comprehensive regulatory frameworks to govern the use and management of Bitcoin. Whereas this could lead to clearer guidelines, reducing legal uncertainties and fostering a more stable environment for businesses and investors, it counter to the value proposition and principles of crypto.

However, enhanced regulations could benefit with focus on consumer protection, ensuring that individuals engaging with Bitcoin are safeguarded against fraud and market volatility. Managed well, this could boost public confidence and encourage wider participation in the digital currency market while also avoiding the futility and stifling construct of pursuing CDBCs.

Even the run up to the announcement caused a surge in Bitcoin prices, highlighting the market's sensitivity to political and regulatory developments. Continuous government support will lead to sustained price increases, potentially attracting more institutional investors and further legitimising Bitcoin as an asset class. Adding to this, as confidence in Bitcoin grows, so will opportunities for investment. Individuals and businesses might diversify their portfolios to include digital assets, leading to a more dynamic and resilient financial ecosystem.

From a societal perspective, government endorsement of Bitcoin, with investments in education, social and commerce adoption, demystify digital currencies for the general public, promoting financial literacy and encouraging responsible usage, will likely trigger further cultural shifts towards greater acceptance and understanding of cryptocurrencies

Embracing Bitcoin aligns with values of privacy and decentralisation; the central principles of the accelerating de-globalisation occurring worldwide. A strategic reserve is a focus that empowers individuals to have greater control over their finances, fostering a more decentralised economic structure that reduces reliance on traditional financial institutions.

Comparison to New Zealand's Pursuit of CBDCs

Thus, in complete stark contrast to the promising developments in the U.S., the New Zealand government's, remain in hot pursuit of Central Bank Digital Currencies (CBDCs) despite widespread public rejection of the idea and the already mismatched-paradigm CDBC’s operate. While the U.S. is embracing the benefits of decentralised digital assets, New Zealand's CBDC initiative risks centralising financial data with little to no hope of adoption; undermining privacy, and creating further new vulnerabilities, increasing further NZ’s distance from world innovation. Instead of fostering financial inclusion and innovation, a CBDC will exacerbate financial exclusion and further stifle New Zealands talent development and technological progress. This pursuit appears legacy thinking, nonsensical and counterproductive.

Summary

The introduction of a strategic Bitcoin reserve by the U.S. government marks a significant milestone in the evolution of digital currencies. Its profound effects on economic stability, financial inclusion, innovation, regulatory frameworks, market dynamics, and societal values highlight the transformative power of cryptocurrencies. As we stand on the brink of this new era, it is crucial to carefully navigate the challenges and opportunities that lie ahead, ensuring a balanced approach that maximises benefits for society as a whole. The U.S. approach to Bitcoin demonstrates a forward-thinking strategy that New Zealand should consider, emphasising the advantages of decentralised financial systems over centralised digital currencies.