Bitcoin is increasingly being seen as a store of value by institutions around the world, with the digital currency appreciating more than 160% in one year. Meanwhile, the US central bank (Fed) has made a quiet admission that gold is beginning to replace the US dollar as the main reserve asset.

The International Monetary Fund (IMF) also issued a warning about the “surprising” decline in the dollar’s ​​share of foreign reserves allocated by central banks and governments around the world.

IMF economists Serkan Arslanalp, Barry Eichengreen and Chima Simpson-Bell highlighted that the decline in the dollar's role over the past two decades has not been accompanied by a corresponding increase in the shares of other major currencies, such as the euro, the yen and the pound sterling.

Instead, there has been growth in holdings of non-traditional reserve currencies such as the Australian dollar, Canadian dollar, Chinese renminbi, South Korean won, Singapore dollar and several Nordic currencies.

‘Stealth erosion’

The IMF text states that, although the dollar continues to be the main global reserve currency, there is an increase in reserves in non-traditional currencies.

Without mentioning Bitcoin and cryptocurrencies, the IMF says that “new digital financial technologies” are the main causes of this change.

Dollar Persistence: Despite the dollar's recent strength, its share of global currency reserves is gradually declining. This decline has not been accompanied by a significant increase in the shares of other major currencies such as the euro, yen and pound sterling.

Growth of non-traditional currencies: There is an increase in reserves in non-traditional currencies due to diversification, relatively attractive returns and the ease of buying, selling and holding provided by new digital financial technologies.

Impact of exchange rate fluctuations: Fluctuations in exchange rates can influence the composition of central banks' reserves, reinforcing the general trend of diversification.

Chinese exception: Although the renminbi has gained ground, its internationalization shows signs of stagnation, with a slight reduction in its share of reserves since 2022, even adjusting for exchange rate changes.

Broad diversification: Diversification into non-traditional currencies is a broad movement and not just concentrated in a few large reserve holders.

Impact of financial sanctions: Financial sanctions may lead central banks to shift their reserves to avoid the risk of freezing, favoring gold, although gold's share of reserves is still historically low.

Earlier this month, the Federal Reserve Bank of New York published a report outlining the narratives surrounding the decline in dollar holdings in official reserves and the increase in gold reserves by central banks.