Bitcoin the Future of the Monetary System?

Why a National Currency Cannot Be the World’s Reserve Currency

Let’s start with a bold claim: A national currency cannot serve as the reserve currency of the entire world. Why?

By definition, a reserve currency is one in which countries store their trade surplus. But why do they need a special currency for this? Why not just keep the surplus in their own national currencies? Because every currency has its own fiscal and monetary policies, interest rates, inflation, and exchange rate.

Imagine global trade taking place in 100 different currencies. It is impossible. So nations agreed to conduct trade and store surpluses in a dominant currency. Usually, this is the currency of the country with the largest economy and military. 

The status of a global currency is a form of power and trust in that country’s economy—other nations won’t entrust a currency from a country they don’t perceive as a dominant force.

Benefits and Burdens of Being the Global Reserve Currency

Though the status of a global reserve currency brings significant benefits to its issuer—like tracking dollar-based transactions, freezing dollars of non-compliant entities (which isn’t possible with Bitcoin), limitless borrowing, exporting inflation to the rest of the world, and recycling the global currency—there are serious drawbacks.

The curse lies in the need to constantly increase the supply of the currency. Why? Because global trade and savings demand a growing supply. If the supply doesn’t keep pace with rising demand, the currency strengthens too much, making the issuer’s exports uncompetitive (as happened with the U.S.).

To avoid this, the U.S. increases the supply by issuing government bonds, which leads to rising public debt. As the debt mounts, creditors begin to question whether it will ever be repaid (U.S. debt currently stands at $36 trillion). Higher risk means creditors demand higher interest rates. Would you lend to someone who already owes that much?

Higher interest means higher debt servicing costs, requiring more borrowing. More borrowing triggers higher interest rates, eventually leading to a point of no return—a permanent deficit where mandatory government spending plus debt service exceed fiscal revenue (forecasted for the U.S. by 2030 if no change occurs).

Raising taxes is politically risky, so governments prefer to borrow more. But creditors aren’t naïve, and higher risk leads to even higher interest rates, triggering a vicious cycle. More money in circulation leads to inflation.

Inflation erodes purchasing power and devalues bonds. When bond investors recognize this and start to lose trust, they begin selling off bonds—raising interest rates even more.

Investors then prefer to store value in hard assets like gold or Bitcoin. This has happened before—with Portugal, Spain, England, and now the U.S. As Mark Twain said: “History doesn’t repeat itself, but it often rhymes.” So, is there any reason to believe the U.S. and the dollar won’t meet the same fate as past global hegemons?

Bitcoin as a Challenger or Store of Value?

As the saying goes, “No one’s candle burns until dawn”—and neither will America’s. The dollar, as the world’s currency, has an expiration date. But how long will it retain its dominance? No one knows for sure. Today, it’s still the most used in international trade (about 50%) and makes up around 60% of global reserves.

So, is Bitcoin—a currency limited to 21 million units and which has gained dollar value over time—a worthy challenger to the dollar? Or is it better suited to be a global store of value?

Could Bitcoin’s non-confiscatable nature encourage nations to use it for payments outside the dollar and SWIFT systems? Let’s not forget the dollar dominates both international payments and reserve storage. Any alternative must beat it on both fronts.

To replace the dollar, Bitcoin would need:

• Broad use in everyday transactions, reserves/savings, and international trade.
• Overcome scalability issues to support fast, cheap transactions for billions—either via the base protocol (Layer 1) or Layer 2 solutions like the Lightning Network.
• Legal clarity and institutional trust, especially from states and central banks.
• Price stability and low volatility to function as a proper unit of account.
• Increased trust in the security, decentralization, and immutability of its protocol beyond just the crypto community.

Currently, only about 400 million people globally own Bitcoin, and roughly 15,000 merchants accept it. Bitcoin supports only 7 transactions per second—far from what’s needed to be a global currency.

However, legal progress is being made. In the U.S., Bitcoin is not classified as a currency (which would put it in direct competition with the dollar) but as a commodity. That’s a strategic win for its long-term adoption.

Bitcoin’s value rose from $0.003 to $109,000 in 16 years—probably the highest ROI of any asset in history—but such volatility makes it impractical for global payments.

Final Thoughts

While the dollar is on the decline, it’s still likely to hold its top position for some time. Bitcoin likely won’t replace the dollar as a global payment tool anytime soon. But as a store of value, Bitcoin is in a far stronger position.

Many countries (including the U.S.) are building Bitcoin strategic reserves, and more individuals and companies are realizing it may be the best long-term asset to preserve value.

In conclusion: Bitcoin is currently inferior to the dollar as a global value transfer mechanism, but vastly superior as a store of value.

Here’s a final illustration:

• In the 1960s, the average U.S. family home cost one gold bar.
• Today, the same house costs dozens of times more in dollars, but still one gold bar.
• In Bitcoin terms: a few years ago, that house was worth 500 BTC, then 50 BTC, and now maybe 5 BTC.

So, where would you rather store the money you earn through honest, hard work? Dollar, gold, or Bitcoin? The choice is yours.