Bitcoin’s Potential as an Alternative Reserve Asset Amid Global De-Dollarization Efforts

• As countries like China move away from the US dollar, Bitcoin is emerging as a competitive alternative reserve asset on the global stage.

• Amid geopolitical tensions, many nations are exploring Bitcoin for the diversification of their reserves, enhancing trade independence.

• “Sovereign adoption of Bitcoin is accelerating this year as demand grows for neutral payments rails that can circumvent USD sanctions,” stated Matthew Sigel from VanEck.

With countries reducing reliance on the US dollar, Bitcoin is positioned as a potential reserve asset, attracting interest globally for trade and investment.

The Push for De-Dollarization

In light of recent global economic shifts, China has instructed its state-owned banks to minimize their dependence on the US dollar. This directive comes amidst escalating trade tensions with the United States, particularly during the tenure of President Donald Trump. The People’s Bank of China (PBOC) is actively seeking alternatives, signaling a significant move toward de-dollarization.

Notably, Russia has also taken strides to reduce its dollar dependency, especially after facing stringent Western sanctions in response to its actions in Ukraine. Following sanctions targeting the Russian central bank and restrictions on major financial institutions, Russia halted trading in US dollars and euros on its Moscow Stock Exchange (MOEX). Furthermore, reports indicate that Russia has utilized Bitcoin as a channel for international trade, facilitating transactions outside of dollar-denominated systems.

Beyond those nations directly impacted by sanctions, India is exploring ways to elevate the international use of the Rupee. The Indian government has entered agreements for oil purchases in INR and has initiated trade discussions with Malaysia, showcasing a broader trend of countries searching for alternatives to dollar reliance.

Why Nations Are Turning to Bitcoin for Trade Independence

As geopolitical instability rises, the adoption of cryptocurrency, particularly Bitcoin, for international trade has increased. Both China and Russia have reportedly engaged in energy transactions settled in Bitcoin, demonstrating its appeal as a means of facilitating trade independent of the US dollar.

Matthew Sigel from VanEck remarked, “Sovereign adoption of Bitcoin is accelerating this year as demand grows for neutral payment rails that can circumvent USD sanctions.” His observations underscore a shift in how nations perceive Bitcoin amidst evolving economic landscapes.

In a related effort, France’s Minister of Digital Affairs recently suggested leveraging surplus electricity from the nation’s energy provider, EDF, for Bitcoin mining. Likewise, Pakistan has announced plans to utilize its surplus power to support Bitcoin mining activities.

In the United States, New Hampshire’s House has advanced a bill allowing the state treasurer to invest up to 10% of certain funds in Bitcoin, highlighting regional interest in adopting cryptocurrencies for state-level finance.

VanEck Predicts Bitcoin to Become a Future Reserve Asset

Looking ahead, predictions from experts such as Matthew Sigel suggest that Bitcoin could emerge as a critical medium of exchange by 2025 and possibly evolve into one of the world’s reserve currencies. Sigel forecasts that Bitcoin might settle 10% of global international trade and that central banks could hold around 2.5% of their assets in BTC as nations follow China’s lead in reducing dollar dependency.

According to Sigel, “China’s efforts are already having second- and third-order effects that create opportunities for alternative assets like Bitcoin.” His insights reflect the potential ramifications of shifting economic policies and their implications for the broader global economy.

Experts warn that a further decline in the dollar’s prominence as a global reserve currency could have dire consequences for the United States, with Zhong Yang Chan from CoinGecko emphasizing the potential for catastrophic impacts on the US economy should these de-dollarization trends continue.

A General Wave of Currency Decline

Research indicates that established currencies, including the US dollar, Japanese yen, British pound, and Euro, are experiencing diminishing strength over time. This decline opens opportunities for Bitcoin to establish itself as a key alternative for international trade settlements.

Sigel aptly noted, “This shift isn’t purely about promoting the yuan. It’s also about minimizing vulnerability to US sanctions.” The preference for neutral, non-sovereign assets is growing, positioning Bitcoin uniquely in today’s financial landscape.

Bitcoin’s Appeal: A Non-Sovereign Alternative

Bitcoin’s non-sovereign characteristic makes it attractive to countries wary of traditional financial systems tied to influential nations. As Terence Kwok from Humanity Protocol points out, “Trust in traditional financial infrastructure erodes during geopolitical standoffs.” Bitcoin provides a transparent ledger and decentralized governance, offering a compelling alternative for those seeking stability in uncertain times.

The inherent scarcity of Bitcoin acts as a hedge for nations grappling with inflationary pressures or currency devaluation. Kevin Guo from HashKey Research notes, “Bitcoin’s scarcity and decentralized nature make it fundamentally different from centralized fiat systems, providing nations a way to protect their assets under inflationary conditions.”

A Replacement or an Alternative?

Despite its potential, experts caution against viewing Bitcoin as a complete replacement for fiat currencies. Kevin Lee from Gate.io suggests, “Bitcoin is increasingly recognized for its unique technological characteristics, but I don’t believe it is meant to replace traditional fiat systems; instead, it serves as an alternative for various business use cases.”

The selective adoption of Bitcoin by various nations will largely depend on their specific economic conditions and needs, particularly in areas such as cross-border remittances and inflation hedging.

What Challenges Still Face Bitcoin’s Wider Adoption?

Bitcoin continues to confront challenges typical of emerging asset classes. As Kevin Lee observes, “Challenges include market volatility, evolving regulatory frameworks, and the maturity of the underlying infrastructure.”

Additionally, Bitcoin’s price volatility limits its usefulness for everyday transactions or as a primary reserve asset. If geopolitical forces impose stringent crypto regulations, it could curtail broader adoption, despite positive macro trends supporting Bitcoin’s utilization.

Another aspect to consider is the dominance of stablecoins in cross-border payments. Guo highlights that stablecoins, pegged to the US dollar, offer reduced volatility that Bitcoin has yet to achieve, making them preferable for international transactions.

Bitcoin Network Under Strain

Since early 2025, Bitcoin has encountered a noticeable slowdown in network activity, despite an overall upward performance in the market. Guo points out the declining usage of the Bitcoin network, noting, “The usage rate is decreasing, with on-chain transaction fees receding to their lowest levels since 2012.”

Data corroborates this decline: from over 610,684 transactions in November 2024, the number plummeted to approximately 376,369 by April 2025, as reported by Glassnode.

The reduction in the number of active addresses illustrates a diminishing demand for Bitcoin in business and day-to-day payments.

Can Bitcoin Scale for Global Use?

The Bitcoin network’s capacity remains limited, linking back to the successful implementation of solutions like the Lightning Network, initiated in 2018. Currently, Bitcoin manages around seven transactions per second, a stark contrast to systems like Visa, which processes up to 65,000 transactions per second.

Guo warns, “If scaling solutions do not gain traction, Bitcoin’s limited transaction capability will hinder its adoption for global demands.” Additionally, the sustainability of the network hinges on miner incentives, which could shift as block rewards decline.

While Bitcoin’s growth as an alternative reserve asset is plausible given current geopolitical trends, substantial hurdles like scalability, regulatory issues, and network efficiency remain. Thus, while Bitcoin is set to play a significant role in reshaping the financial landscape, a complete transition from existing systems appears distant.