When it comes to crypto, even Bhutan is getting in on it

Early last year, El Salvador launched "bonds" backed by Bitcoin and even plans a futuristic "Bitcoin City". However, most countries are currently less proactive. The US holds about 200,000 BTC, seized by the Department of Justice. These are worth tens of billions of dollars. China seized 194,000 BTC from the fraudulent 'PlusToken' case, while the UK government has seized 61,000 BTC from criminal cases.

Others have been Bitcoin spenders. Germany sold around 50,000 BTC in 2024 to support its budget, triggering crypto market turbulence, while Ukraine has spent over 46,000 BTC mainly from donations to fund its war effort against Russia. Ukraine still has plenty in stock, however, and currently ranks fourth globally in terms of its crypto reserves (after the US, China, and the UK).

Crypto diversification

While Bitcoin dominates headlines, other forms are surging. This includes 'stablecoins' (a type of cryptocurrency that aims to maintain a stable value relative to a specified asset, typically the US dollar) and Central Bank Digital Currencies (or CBDCs, a digital of a country's fiat currency). More than 70 countries plan to launch state-backed digital currencies, and Europe is pushing ahead with a digital euro. Some may wish to reduce their reliance on the dollar and US stablecoins.

The total market capitalisation of all cryptocurrencies worldwide is estimated at around $4tn, so governments have had no choice but to become players. Bitcoin faces multiple challenges, not least accounting complexities, security risks, and price volatility, with swings of up to 20% in a day not unknown. While private investors may take this in their stride, such drops cause alarm when they affect public finances. Likewise, markets can get rattled when governments liquidate large holdings, such as in Germany in 2024.

Despite these risks, governments remain committed to their strategic engagement with digital and crypto assets. For some, Bitcoin is a necessity; for others, it is a speculative gamble or a geopolitical instrument. Yet regardless of any one state's individual position, there is no doubt that there has been a profound shift in the treatment of digital assets, which are now increasingly central to economic policy.

In many cases, the question is not 'will' states adopt digital assets, but how. Some will amass assets as an economic lifeline, others for geopolitical reasons, others as a symbol of innovation. How this develops will shape the future of the global financial system. It may even grant mountainous Bhutan a voice in the markets of the major powers. Yet with its tranquillity, calm, and wisdom, the Kingdom's people likely know that happiness is still the world's most valuable asset.