The Context

Financial strategy has taken on new meanings in the modern age of warfare, with policymakers in the United States and allies concentrating largely on traditional macroeconomic tools like sanctions. However, as the landscape changes, the real conflicts are occurring on smartphones and within currency markets.

China has been systematically attempting to undermine the United States’ most significant asset: the dollar. As the world's primary reserve currency, the dollar underpins U.S. economic and geopolitical clout. If weakened, America's influence could dwindle, magnifying its debt issues. This is the very outcome desired by the Chinese Communist Party and the Kremlin.

The Financial Shift

Both China and Russia have offloaded vast quantities of U.S. Treasury bonds while simultaneously expanding their gold reserves. These actions indicate a strategic pivot away from the dollar and our Western-dominated economic structure.

Adapting to New Realities

China's financial technology and cryptocurrency initiatives serve as instruments of economic expansion and surveillance. The U.S. must adapt by both exporting its own financial technologies and recognizing Bitcoin as a potential strategic reserve asset, rather than restricting innovation.

Prominent figures like President-elect Donald Trump have begun to acknowledge the advantages of holding Bitcoin within the national treasury to hedge against inflation, thereby bolstering defenses against economic challenges posed by China.

The Federal Reserve's Portfolio

Currently, the Federal Reserve maintains a diverse array of reserves; however, as of 2024, it lacks a native digital asset, which is becoming increasingly critical in a digitizing economy. Bitcoin, often referred to as 'digital gold', emerges as an ideal candidate to fill this void, representing a scarce resource in a world of inflation.

Confronting Financial Predators

The ongoing financial tussle with China necessitates a comprehensive response from the U.S. This includes empowering the private economic sector to engage with contentious economies, particularly throughout the Indo-Pacific region. The implications of inaction could lead to adversarial states dominating global financial services and citizens' access to their finances.

The urgency of the moment calls for more decisive actions. Authorities need to recognize that leveraging Bitcoin as a reserve asset could profoundly impact global financial stability and spur innovative growth.