Central Banks Cautious on Bitcoin Reserves Amid Volatility Concerns

Despite the increasing global interest in cryptocurrencies, only a small fraction of central banks are planning to incorporate Bitcoin into their reserves over the next decade. According to a recent survey by OMFIF, just 3% of central banks foresee building a strategic Bitcoin reserve in the coming years. This cautious approach is attributed to several factors, including the volatility of Bitcoin, regulatory uncertainties, and the structural conservatism of central banking institutions.

Central banks prioritize stability and liquidity, qualities that Bitcoin, despite its resilience, does not consistently offer. The price fluctuations of Bitcoin can pose significant risks to the balance sheets of institutions whose primary objective is to safeguard national economies. Shawn Young, chief analyst at MEXC Research, noted that central banks are closely aligned with frameworks like the Basel Accords or IMF guidelines, which do not yet classify Bitcoin as a reserve-grade asset.

The survey also highlights a growing appetite among central banks to diversify their portfolios away from traditional government bonds. After gold, corporate bonds and public equities are the asset classes in highest demand over the next decade, with a net demand of more than 25% among respondents looking to increase exposure. Some 16% expect to reduce government bond holdings, and 13% plan to lower cash allocations. Digital assets are beginning to attract some attention, too, with around 10% of respondents considering increasing allocations. However, the focus is mainly on tokenized securities rather than outright cryptocurrencies.

Governments have become some of the largest holders of cryptocurrency, primarily through seizures connected to law enforcement actions. Historically, seized crypto was quickly liquidated through auctions or private sales to recover value for victims or treasury accounts. However, this practice appears to be changing. The United States, for instance, has begun to formalize an approach that moves from automatic liquidation to strategic retention of seized digital assets. This shift signals a potential evolution in how governments manage and utilize digital assets.

Some countries have already embraced Bitcoin reserves more boldly. El Salvador’s 2021 move to make Bitcoin legal tender put it in the global spotlight, though this approach has sparked controversy and raised concerns with the IMF. The organization has tied loan conditions to reducing or eliminating Bitcoin policies, illustrating the political risks involved in adopting crypto at the sovereign level. Eventually, El Salvador had to change its regulatory stance on BTC.

Bhutan offers a quieter but arguably more strategic example. The Himalayan nation mines BTC using renewable hydropower through its sovereign investment fund, turning energy resources into a digital reserve. This approach allows accumulation of Bitcoin without purchasing on open markets or triggering external scrutiny. Bhutan’s approach allows for a low-key, infrastructure-first access to Bitcoin, proving that resource-rich countries have the ability to convert domestic advantages into digital assets without overhauling monetary policy.

While Europe’s approach remains cautious, signs of change are emerging. In the Czech Republic, new central bank governor Aleš Michl has proposed allocating as much as 5% of the country’s reserves to Bitcoin. This stance contrasts with the European Central Bank, where President Christine Lagarde continues to dismiss crypto as unsuitable for reserves, citing liquidity, safety, and anti-money laundering concerns.

Switzerland presents a unique case where popular politics may influence central bank policy. A People’s Initiative launched at the end of 2024 proposes amending the constitution to require the Swiss National Bank to hold bitcoin alongside gold. The campaign argues that including bitcoin would “strengthen national sovereignty and future-proof its monetary base.” Because the SNB is a joint-stock company with strong legal independence, this initiative would require a constitutional amendment and a national referendum, potentially the world’s first on Bitcoin as a reserve asset. While the SNB itself remains cautious, the popular movement signals rising institutional and public comfort with digital assets in a country known for financial privacy and asset protection.

Sweden, meanwhile, has taken a more procedural approach. A parliamentary inquiry has been submitted to the Riksbank on whether BTC should form part of its currency reserves. This inquiry follows the EU’s MiCA regulations, which provide clearer legal frameworks for digital assets. Still, the Riksbank’s mandate prioritizes price stability and risk minimization, making rapid adoption unlikely.