Why Sovereign Nation States May Begin Acquiring Bitcoin In 2022

Bitcoin has grown from being ‘internet money’ used by only a few thousand people during its first few years to being part of the balance sheets of big companies and sovereign states. El Salvador, which has invested millions in the bitcoin asset to become a national reserve, is an example of a country who fully supports the mission.

Even though bitcoin is far from becoming the world’s de facto reserve currency, countries can no longer ignore it. That’s why it is expected that more nation-states will purchase the cryptocurrency in the next year.

The Fidelity of Why Bitcoin Will Be Purchased by Countries

Fidelity has published an extensive report about bitcoin, including its role in helping to decide which countries will be the global economic leaders. Because bitcoin is becoming more widespread as a reserve currency means that countries holding it may have a greater influence than others, regardless of where they are today.

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The history of innovation has shown us that people who accept new technologies and innovations have always done better than those who don’t. This may be true for bitcoin as well.

Fidelity also refers to it as a “very high stakes game theory.” If bitcoin adoption continues to grow, then those who got in earlier will no doubt be better off than the rest. This will push other countries to also acquire the digital asset as “insurance” so as to not be left behind even if they do not believe in the investment thesis or the adoption of the digital asset.

In essence, bitcoin would be purchased by sovereign nations-states as a form of hedge in case the currency becomes important later. “In other words, a small cost can be paid today as a hedge compared to a potentially much larger cost years in the future.”

The Total Ban will Be Very Difficult

The report touched on the bitcoin ban debate, which has been raging in the space. It stated that it would be difficult to ban Bitcoin altogether. The report stated that although it is not impossible it could result in a substantial loss of wealth or opportunity.

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It is still not possible to pass a complete bill on cryptocurrencies that will provide regulatory clarity. The last-year’s infrastructure bill, which is scheduled to take effect in 2024, continues to face numerous modifications. With such a lengthy time period before implementation, it is impossible to predict where this bill will end up.

However, Fidelity noted in its report that a digital asset regulation being passed into law will be a milestone for bitcoin, stating that “what we think is most notable is that digital asset regulation becoming law is another milestone as the asset class comes of age and establishes itself.”

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