The Rise of Bitcoin Is Pushing Central Banks Worldwide into an Unprecedented Policy Dilemma
Renowned writer Adam Livingston recently pointed out that Bitcoin poses a "monopolistic challenge" to central banks around the world, as its uncontrollable issuance mechanism has upended traditional monetary policy tools.
Currently, central banks globally face a typical "policy trilemma": they must defend their local currency exchange rates through interest rate hikes, while also depleting foreign exchange reserves to stabilize the market, and may ultimately be forced to actively purchase Bitcoin to adapt to the trends of the times.
This dilemma is particularly pronounced against the backdrop of continuous depreciation of fiat currencies. At present, only El Salvador and Bhutan have officially included Bitcoin in their national reserves, holding 6,089 and 13,029 coins respectively. In contrast, countries like the United States and the United Kingdom hold large amounts of Bitcoin (for example, the U.S. government holds over 215,000 coins) due to law enforcement seizures, but these bitcoins have not yet been officially recognized as national strategic reserves.
As prominent analysts like Anthony Pompliano, Willy Woo, and Arthur Hayes emphasize, the birth of Bitcoin is largely a result of the uncontrolled money printing by central banks leading to currency devaluation. The Kalypsus research agency further corroborated this view, stating that major economies have resorted to money printing to cope with high debt levels, driving investors to seek inflation-resistant assets like Bitcoin.
However, there remains a fundamental contradiction in the global central banking system's acceptance of cryptocurrencies. Traditional monetary policy relies on absolute control over money supply and capital flows, while Bitcoin's decentralized nature directly threatens this mechanism.
Although many countries allow investors to conduct crypto trading under regulation (to achieve control through taxation), there are generally restrictions on crypto payment channels and methods that bypass the banking system.
Overall, central banks worldwide are facing challenges from decentralized assets like Bitcoin. This new form of value storage, based on algorithmic credit, is weakening central banks' monopoly over currency issuance and has the potential to reshape the monetary system landscape.
Currently, global monetary policymakers are in a dilemma, having to defend the dominance of traditional monetary policy while also responding to the impact of cryptocurrencies on the stability of sovereign currencies. This structural contradiction indicates that the future international monetary landscape will present a complex situation of a tripartite balance among fiat currencies, digital currencies, and crypto assets.
