Central Banks Shun Digital Assets, Favor Gold Amid Geopolitical Risks

A recent survey conducted among 91 global central banks, managing over $7 trillion in foreign exchange assets, revealed that none of the participating central banks have plans to invest in digital assets. The survey, which took place between January and March 2025, also found that over half of the respondents oppose the idea of a strategic reserve fund for Bitcoin. This sentiment reflects a cautious approach towards cryptocurrencies, with a majority of central banks viewing them as not yet credible enough to be considered suitable reserve assets.

Only one central bank expressed support for the idea of a Bitcoin strategic reserve, while 50 central banks (59.5%) stated opposition and 33 central banks (39.3%) remained undecided. Furthermore, 15.9% of central bank respondents last year indicated they would consider investing in digital assets or cryptocurrencies in the next five to ten years, but in the 2025 survey, this figure has significantly dropped to just 2.1%.

The survey highlighted several key factors influencing reserve management strategies over the next five years. Inflation and interest rates were identified as the most significant factors, with reserve managers expecting interest rate divergence between the US and the eurozone to be around 175 basis points by the end of 2025. This divergence is expected to pose both opportunities and challenges for managing existing portfolios, as higher rates make entry points in fixed-income assets more attractive but also impact the value of duration assets.

Geopolitical risks and US protectionist policies were cited as major concerns. Nearly 63% of respondents ranked these issues as their most pressing concerns, indicating a heightened awareness of geopolitical escalation and its potential impact on reserve management. As a result, 75% of reserve managers now incorporate geopolitical risk into their decision-making processes, with many making changes to their portfolios in response to these risks. The most common changes included adjustments to bond issuers, counterparties, and currencies invested in.

Gold remains a favored asset for central banks, with 37.5% of respondents planning to increase their gold allocations. The benefits of holding gold were cited as portfolio diversification, long-term store of value, and performance during periods of crisis. This preference for gold underscores its enduring role as a safe-haven asset in times of uncertainty.

The survey also explored the potential for cryptocurrencies and stablecoins in reserve management. While no central banks reported making investments in these assets, a minority believed that cryptocurrencies were becoming more credible as an asset class. However, the majority of central banks were against the idea of a strategic Bitcoin reserve fund, with a significant number remaining unsure about its viability.

In terms of foreign exchange (FX) interventions, half of the central banks surveyed reported conducting FX interventions over the past 12 months. This highlights the importance of FX interventions as a tool for maintaining investor confidence and acting as a buffer for possible FX interventions. The most common reasons for increasing reserves in 2025 were maintaining investor confidence and acting as a buffer for possible FX interventions.

Overall, the survey provides valuable insights into the current and future strategies of global central banks. It underscores the importance of inflation, interest rates, and geopolitical risks in reserve management, while also highlighting the cautious approach towards digital assets. As central banks continue to navigate an uncertain economic landscape, their strategies will likely evolve to address these challenges and opportunities.