As bitcoin continues to break new all-time high prices, more countries are mauling over adopting bitcoin. Countries are increasingly considering acquiring bitcoin as part of national strategic reserve, the same way gold does.
In 2021, El Salvador became the world’s first country to officially adopt Bitcoin as legal tender and integrate it into its national reserves. Under President Nayib Bukele’s leadership, the country currently has bitcoin holdings of 6,189 valued at over $611M at the time of writing and has continued to make periodic investments. El Salvador sees Bitcoin as a tool to reduce reliance on the U.S. dollar, promote financial inclusion, and attract crypto-focused tourism and businesses. The average acquisition cost is $44,000 meaning at current prices, the investment is already up 139%. Additionally, the government launched initiatives like the Bitcoin-backed “Volcano Bonds” to fund infrastructure projects and renewable energy investments.
Following El Salvador’s lead, other developing nations are exploring Bitcoin adoption. For example, Argentina, grappling with high inflation, has seen political leaders propose Bitcoin integration as a solution to economic instability. In the Pacific, smaller nations like Tonga have discussed adopting Bitcoin to empower their economy through remittance savings and decentralized finance. Bhutan has adopted a different strategy by directly mining bitcoin. Early this year, it emerged that the little-known South Asian country had been mining bitcoin from hydropower generating around 55-75 BTC ($3.6 -$4.8M) every week. Bhutan bitcoin holdings are held through Druk Holdings and on-chain data shows it started dabbling in bitcoin in 2019 and accelerated in 2020 onwards. It is estimated the country has mined over 27,727 bitcoins over time ($1.3 billion). In November, it was reported that Bhutan cashed out 367 bitcoins worth $33.5 million when bitcoin new ATH of $90,000. The country also cashed when bitcoin hit 70,000 and has so far cashed out $100M and still holds 12,206 bitcoin valued at approximately $1.1 billion.
Reports indicate that several countries in Middle East may have already bought bitcoin as a national reserve but have not yet announced it publicly. In Europe, different countries hold Bitcoin but have a different philosophy of dealing with it. Germany for example decided to sell 50,000 bitcoins between June and July generating revenue of $2.8 billion. As of today, they would have had over $5 billion worth of bitcoin profits if they held into it. The bitcoins were seized from “Movie2k’ criminal case.
Actions by German government have come under criticism. Former German finance minister, Christian Lindner, has criticized the government for failing to incorporate Bitcoin into the country’s financial strategy. He cites the recent developments in USA under President-elect Donald Trump who has been pro-bitcoin.
Talking of the US, the country is poised to have the biggest U-turn when it comes to Bitcoin. Donald Trump has promised to support bitcoin and crypto in general by making the USA a friendly crypto nation. Already US senator Lummins‘ has a bill that seeks to compel the Federal Reserve to use part of its gold reserves to buy 1 million bitcoins. If the bill sees the light of day, the move would aim at holding Bitcoin for 20 years and use the gains to reduce the national debt. Currently, US holds about 207,000 bitcoins making it the top holder ahead of China with 194,000.
It is important to note that most of these holdings are from seized bitcoins from criminal activities. Only El Salvador and Bhutan have publicly announced they have bought the bitcoins either through mining or direct purchases.
The Road ahead in 2025 and beyond
Even though it is still early to make a conclusion about bitcoin as a nation’s strategic reserve, the current positive returns from countries such as El Salvador and Bhutan are compelling. It would seem that smaller countries would be at a greater advantage to test the bitcoin reserves strategy. Bitcoin can quickly become a geopolitical issue. A deputy in Russian parliament called on the government to adopt bitcoin as ‘strategic reserve to cushion against inflation, sanctions that are a threat to Russian financial stability. Trump also said last week USA should seek leadership in crypto field ahead of China so as not allow China to dictate the rules.
The upside seems to be higher than the potential downsides of missing out all-together. As Donald Trump is sworn in on January 20th, 2025, the direction the United States will take in terms of crypto regulation and adoption is clear. The US Fed Chair, Powell even called bitcoin a competitor to gold. Soon it might be very expensive for other smaller countries to even hold considerably bitcoin reserves. Already companies like MicroStrategy, Blackrock, and Mara digital holdings are pilling up on bitcoin and hold considerable amounts. If more companies adopt a similar strategy, the road ahead for bitcoin as digital gold will look even more promising.
