Bitcoin Policy Institute: central banks should include bitcoin in reserve asset portfolios

On October 28th, the Bitcoin Policy Institute (BPI) released a major research report, “The Argument for Bitcoin as a Reserve Asset,” according to Cointelegraph. According to the report, global central bank gold reserves amounted to $2.2 trillion as of the first quarter of 2024, and are continuing to expand their gold allocations.

Matthew Ferranti, an economist and author of the report, suggests that central banks should include Bitcoin in their reserve asset portfolios to hedge against multiple risks, including inflation, geopolitical conflicts, capital controls, sovereign debt defaults, banking system crises, and international sanctions imposed by the U.S. government. Ferranti specifically highlights Bitcoin's role as a decentralized asset with low correlation to other financial instruments, making it ideal for use as a reserve asset. Ferranti highlighted that Bitcoin, as a decentralized asset with low correlation to other financial instruments, is an ideal tool for portfolio diversification.

In terms of risk management, the report notes that Bitcoin is free of counterparty risk and can be an effective hedge against sovereign default risk, including the risk of financial sanctions faced by countries such as Venezuela and Russia. While a bitcoin and gold allocation may not be suitable for all central banks, bitcoin has the same store of value and hedging properties as gold in dealing with rapid currency devaluations.