“We are seeing some pretty rapid growth of uptake of crypto in some emerging markets. In terms of currency substitution, [those] risks are rising.” Gita Gopinath (Chief Economist, IMF)
The idea of including cryptocurrencies like bitcoin among a nation’s reserve assets as a complement or alternative to traditional holdings like foreign currencies and gold is gaining renewed interest in some quarters. Former Thai Prime Minister Thaksin Shinawatra has advocated for Thailand’s financial institutions to adopt a more digital approach, including permitting the trading of stablecoins or asset-backed digital tokens. He emphasized that using cryptocurrency poses no inherent risk, suggesting it functions merely as “another currency in the world ”.
Given Thailand’s former PM line of thinking regarding cryptocurrencies like Bitcoin, the article will examine the following i.e., the claimed benefit of such policy proposals and empirical evidence and precedents, how leading nations and central banks view such ideas and the risks associated with it and lastly what is India’s stance on it to order to understand about such proposals in a more nuanced way.
The Claimed Benefits of holding Bitcoin as a reserve and Empirical Evidence and Precedents
The proponents of holding bitcoin in national reserves argues that as a non-sovereign digital asset, bitcoin may provide diversification by being less correlated with traditional reserve assets such as USD, EUR, or gold, potentially reducing portfolio risk. Its fixed supply of 21 million coins has led advocates to suggest it could act as an inflation hedge or protect against currency depreciation, although empirical evidence is mixed – Choi and Shin (2021) found bitcoin can display inflation-hedging properties under certain conditions, while Pinchuk (2023) shows it sometimes reacts negatively to inflation surprises. There are certain other claims which goes financial considerations i.e., holding bitcoin may confer geopolitical and financial independence, offering an alternative store of value in unstable markets, as well as modernization and signal value, demonstrating a country’s embrace of fintech and blockchain innovation.
In terms of precedents, there are few countries which have experimented with bitcoin holdings, though primarily outside conventional reserve frameworks. El Salvador adopted bitcoin as legal tender in 2021 and holds over 6,100 BTC (~USD 550 million), with voluntary usage and IMF-imposed limits on further accumulation. The U.S, China, UK, and Ukraine possess bitcoin mainly via seizures, not as a deliberate reserve strategy. Overall, while some experimentation exists, bitcoin is not treated as a mainstream reserve asset comparable to gold or major currencies.
Central Banks Views and Risks/concerns
Major Central banks and financial institutions generally view the inclusion of bitcoin in national reserves with caution. The Swiss National Bank has stated that bitcoin does not meet reserve requirements due to high volatility and limited market liquidity. The Czech National Bank considered a small allocation but faced scepticism over legal, accounting, and operational challenges. The Bank for International Settlements (BIS) has highlighted systemic and monetary stability risks, while exploring safer digital alternatives like CBDCs. Key concerns include price volatility, limited liquidity, legal and accounting uncertainties, and operational and custody risks such as hacking or theft. Additionally, bitcoin’s lack of cash flow complicates valuation and can affect central bank balance sheets, while potential large losses carry political and reputational risk.
India’s Current Stand on cryptocurrencies
India maintains a cautious and regulatory-focused approach toward bitcoin and other cryptocurrencies. The Reserve Bank of India (RBI) has clarified that virtual currencies, including bitcoin, are not authorized as legal tender and warned of risks such as volatility, fraud, and lack of consumer protection. While the 2018 banking restrictions on crypto were struck down by the Supreme Court in 2020, trading and exchanges continue under legal uncertainty without a comprehensive statutory framework. India has implemented a 30% tax on crypto capital gains and 1% TDS on transfers, reflecting the treatment of cryptocurrencies primarily as speculative assets rather than reserve instruments. Government and RBI statements highlight concerns regarding financial stability, systemic risks, and regulatory challenges, and as of mid-2025, India continues to resist granting bitcoin legal tender status.
In conclusion the prospect of including bitcoin in national reserves is a subject of ongoing policy discussion. While some countries like El Salvador have integrated bitcoin into governmental strategies, most nations hold it only through seizures or mining rather than as a deliberate reserve asset. Academic research shows mixed evidence on bitcoin’s effectiveness as an inflation hedge or protection against currency fluctuations. Central banks and multilateral institutions remain cautious due to concerns over volatility, liquidity, legal, accounting, and operational risks. For countries considering such a move, including Thailand, any adoption would need to be measured, transparent, and limited in scale. In India, the approach continues to emphasize regulation, taxation, and consumer protection rather than reserve adoption, reflecting the need to balance potential benefits against substantial financial and systemic risks.
