Will Central Banks Ever Buy Bitcoin?

Over the past decade, Bitcoin has gone from an obscure digital asset to a trillion-dollar asset class that institutions and even some governments are starting to take seriously. With major financial firms like BlackRock launching Bitcoin ETFs and countries like El Salvador holding Bitcoin as part of their reserves, the question arises: Will central banks ever buy Bitcoin?

At first glance, Bitcoin seems like a hedge against traditional monetary policies—an alternative store of value, similar to gold. Some speculate that central banks could start accumulating Bitcoin as a reserve asset. However, upon closer examination, there are several compelling reasons why this is unlikely to happen. In fact, central banks buying Bitcoin would contradict their fundamental roles in financial stability and monetary control.

Let’s break down the key arguments for and against central banks purchasing Bitcoin—and why it remains a dead asset in their eyes.

The Case for Central Banks Buying Bitcoin

While we believe central banks will never truly embrace Bitcoin as a reserve asset, let’s start by considering why some argue it could happen.

1. Bitcoin as a Hedge Against Inflation

Bitcoin is often compared to gold—an asset that central banks have historically accumulated to hedge against inflation and currency devaluation. Unlike fiat money, Bitcoin has a fixed supply of 21 million coins, making it immune to inflationary pressures. Some Bitcoin advocates argue that as global debt levels rise and fiat currencies become more unstable, central banks should look to Bitcoin as a modern hedge against economic uncertainty.

2. Institutional Legitimization

Over the years, Bitcoin has gained legitimacy in the financial sector. The approval of Bitcoin ETFs, growing corporate adoption, and regulatory clarity in several countries have transformed Bitcoin from a speculative asset to a mainstream investment vehicle. If institutions like BlackRock and Fidelity see Bitcoin as a viable store of value, why wouldn’t central banks?

3. Strategic Diversification

A central bank’s reserve typically consists of foreign currencies, gold, and government bonds. Adding Bitcoin to the mix could provide diversification benefits, reducing reliance on traditional financial systems. Some speculate that countries facing sanctions or geopolitical risks—like Russia or Iran—might use Bitcoin to bypass financial restrictions.

The Case Against Central Banks Buying Bitcoin

Despite the speculative arguments above, there are far stronger reasons why central banks will never seriously buy Bitcoin.

1. Bitcoin is a ‘Dead Asset’ for Central Banks

While Bitcoin can appreciate in price, it lacks the key functionality that makes an asset valuable to a central bank—utility. Central banks accumulate reserves to either:

• Intervene in currency markets to stabilize exchange rates.
• Back their currency issuance to maintain credibility.
• Provide liquidity during financial crises.

Bitcoin does none of these things. Unlike government bonds, which generate yield, or foreign currency reserves that can be used in trade, Bitcoin just sits in a wallet, doing nothing. If a central bank ever needed to use its reserves in an economic downturn, selling Bitcoin would crash the market, instantly devaluing their own holdings. This makes Bitcoin an unreliable and impractical asset for central banks.

2. Liquidity Issues and Market Fragility

While Bitcoin has grown substantially, it is still a relatively small and volatile market compared to traditional reserve assets like the U.S. dollar or gold. If a central bank were to buy Bitcoin, it would have to do so cautiously, as even a moderately sized buy order could send prices soaring.

More importantly, if central banks were to accumulate Bitcoin and later needed to sell, the sell pressure alone could collapse the market. Imagine the Federal Reserve trying to offload billions of dollars worth of Bitcoin in a liquidity crisis—Bitcoin’s price would tank, eliminating much of the value the central bank was relying on.

3. Bitcoin Contradicts the Purpose of Central Banks

Central banks exist to manage monetary policy, regulate the financial system, and maintain economic stability. Bitcoin represents the opposite of their mandate—it is decentralized, unregulated, and outside the control of any government institution.

For central banks to start accumulating Bitcoin, they would have to embrace a monetary asset that they cannot control, which completely contradicts their entire reason for existence. If anything, central banks would rather develop their own Central Bank Digital Currencies (CBDCs), which give them full control over the monetary system, rather than adopting Bitcoin.

4. Geopolitical and Regulatory Barriers

Even if a few central banks wanted to buy Bitcoin, geopolitical constraints would make it difficult.

• The United States and the European Union would likely discourage central banks from holding Bitcoin due to its association with illicit transactions and lack of regulation.
• Global institutions like the IMF and World Bank have explicitly warned against countries adopting Bitcoin as legal tender, as seen with El Salvador.
• Bitcoin’s decentralized nature means it is not backed by any government, making it an unattractive asset for international trade settlements or financial agreements.

5. Bitcoin as a Threat, Not an Ally

Perhaps the biggest reason central banks will never buy Bitcoin is that Bitcoin challenges their authority.

Bitcoin was designed as an alternative to the fiat system—a currency that operates outside the control of central banks and governments. By holding Bitcoin, central banks would essentially be admitting that their own currencies are inferior. This would undermine public trust in traditional monetary systems and could lead to further adoption of Bitcoin as a parallel financial system—something central banks absolutely do not want.

Could Some Countries Still Do It?

While major central banks (like the Federal Reserve or the European Central Bank) will likely never buy Bitcoin, some smaller or politically isolated countries might.

• Countries facing severe sanctions (e.g., Russia, Iran, North Korea) could turn to Bitcoin as a financial workaround.
• Some emerging market economies might experiment with holding Bitcoin in reserves to attract investment or as a hedge against currency instability.
• Countries that are already deep into Bitcoin adoption, like El Salvador, could continue accumulating.

However, these would be exceptions, not the norm. The global financial system is structured in a way that discourages central banks from accumulating speculative assets.

Final Thoughts: Bitcoin and Central Banks Are Opposites

Bitcoin’s very existence is a rejection of the centralized control that central banks represent. While institutions and retail investors might see Bitcoin as a valuable hedge, central banks have no real incentive to hold it.

At the end of the day, Bitcoin is not an asset that serves the needs of central banks. It does not generate yield, lacks liquidity for large-scale transactions, and would collapse in value if sold in bulk. If a central bank were to buy Bitcoin, it would be effectively betting on an asset that could destroy its own credibility.

For Bitcoin believers, this might be disappointing—but in many ways, it is also reassuring. Bitcoin was never meant to be an asset controlled by central banks. Its entire value proposition is that it exists outside of their reach.

So, will central banks ever buy Bitcoin? Unlikely. But maybe that’s for the best.