Banks considering Bitcoin as reserve assets

Banks tend to keep certain assets in reserves as a way to store value, which brings various economic advantages. But bringing Bitcoin into the mix has its ups and downs. For one, it could help manage inflation and even reduce Bitcoin's wild price swings for its users. On the flip side, that same volatility might mess with a bank's financial stability. Overall, this could lead to a more stable global economy. You can bet banks are starting to look into this possibility.

Banks can do things they want even under regulations from governments and central banks as well as other regulatory agencies. They have never been a trustable and safe places for storing your fund especially in long term. You mentioned about banks and their activities of using some tools for their benefits - which I think wealth growth potentiality. By chasing wealth, they take risk and they can use customer's funds deposited to their banks in shady, untransparent and also very risky ways. Customers can not know all activities behind the scene do by banks and they only know part of it when banks start death spirals or collapse. It's super risky and to avoid such uncontrollable risks, you can store your property, wealth in Bitcoin. With Bitcoin, it's very easy and you can manage it all by choosing an open-source and non-custodial wallet for storing your bitcoin, having your own Bitcoin bank. Events made you scare about custodial wallets, centralized exchanges.

If banks really have a solid system to safeguard the bitcoins they’re holding, then I guess they can offer that service. As for the volatility, they could always set certain rules or policies for depositors. And we all know the banking industry, they’re heavily regulated, so with the right framework, it’s possible. But honestly, I still wouldn’t trust banks with my bitcoin. When it comes to reserves though, if the government decides to build what they call “strategic reserves,” then they should also be prepared with proper measures to protect it. Hacks happen all the time, we’ve seen enough news to know that risk is real. That said, in general, bitcoin will always make sense as a reserve asset since it naturally hedges against inflation.

Banks can keep Bitcoin safe if it's theirs, but if it's yours they can take advantage of the Bitcoin and bend it to their own advantage not the owners, the funny part is bank will cheat you legally, right in front of you. They are humans and to err is human, they can be tempted to do as they see fit with your money and asset, they can take your life too even when it comes to taking over your asset or money. Keeping my Bitcoin in the bank is like exposing all my worth to the same people that have my phone number and also my home address. These people have all the details about you and also back door to your account and assets, very dangerous if you ask me.

What is the cons of making bitcoin a reserve in the national level? I do not see any cons about it. Only what I see are pros because bitcoin is different from the fiat the countries are using because bitcoin is deflationary. Bitcoin price may fall in short period of time but it will later increase, get to all time high and still increase more.

Banks can & will custody Bitcoin for their customers. I believe legislation is well on the way to becoming a reality for people in the US. It’s only a matter of time until the majority of banks allow Bitcoin services. If mainstream adoption continues to ramp up then it’s a guarantee because banks will be missing out by not incorporating Bitcoin into their business model.

Any Bank that wants to add Bitcoin their asset, shouldn't think of stabilize the market price because they don't have such powers, Banks especially the Central Banks can do well to controlling the activities and inflation of Fiat as that is within their purview, but they cannot extend that to Bitcoin. However, the reason why banks are currently investing and holding Bitcoin is because they've seen how potential Bitcoin can be, initially a lot of them were skeptical in adopting Bitcoin, else Banks would have been the highest adoptors of Bitcoin if they had the foresight.

There are cons, maybe on the individual bank level, they have to go through long and strenuous regulatory protocols to keep Bitcoin reserves directly which is why some of them feel better to invest into the spot ETFs, since the ETFs operate on already established regulatory guidelines.

Banks reserve various assets to balance the risk. Due to volatility, they might not consider reserving Bitcoin against users' funds. But they might add Bitcoin to their own portfolio, like some other institutions that reserve Bitcoin. It does mean that from their revenue some of the part would be safely reserved. So they won't have problems even during the market dump. Because the reserve isn't against the value of the users' funds. However, I am not against reserving Bitcoin by the bank. Just wondering about risk management during the dump. If the reserve is executed by the government directly, then it's positive for the country. Even if a dump happens, it will definitely recover and create a new high. Banks would need to develop something before reserving Bitcoin to reduce the risk.

Yeah I think that's just the significant difference between fiat and bitcoin fiat can fall in value for a long duration while the dip in the price of bitcoin does not last long, it can only last for some couple of days for example (3 to 4 days) sometimes it might not even get to this before it will start appreciating again. While the dip in fiat can last for some couple of months sometimes years before it will start appreciating again, so therefore I think is not a bad idea if the bank choose to hold bitcoin as reserve.

Those other assets or store of value are regulated but bitcoin is not yet. So banks may not be able to come in yet and especially for the volatility. To regulate liquidity in bitcoin is pivotal to volatility and to do that requires KYC. So we need not be in a haste but be ready for KYC if banks have to become a third party to customer. They can't do any of those in isolation from the government. However, it doesn't point to the fact that the economy will be stable. Fiat isn't that volatile but the economy goes into recession and comes out of it and sometimes goes deeper in recession.

Banks already offer custody services, both in the US and in other countries. You just have to use the search engine to check it out. What I find interesting about the OP's post, which at first glance seems simple, is whether banks in different countries can hold bitcoin directly for their reserves. Many institutions cannot, and have to use bitcoin ETFs instead. It would be curious if a bank offered bitcoin trading and custody services but could not have bitcoin in its own reserves.

Bottom line is that, because of the high volatility with bitcoin, banks and government economic institutions wont consider it as a reserve considering how banks have approached bitcoin as an alternative to it existence and what we have seen, pros will definitely be higher and banks will never look at the positive side of bitcoin since their wont be able to forecast the accurate timing for the investment maturity.

Let us say the banks are the governments because the Central Banks or the world banks is a Centralized sector controlled by the governments. So haven put you expression to fact, YES the governments usually backs it economy system of the nation with resourceful assets that are potential to hedge against inflation over the long time to conserve economy values. The federal reserves had evolved around investing or holding on foreign bonds,  global commodities and other global assets. But as at the evolution of digital and economy financial system to Bitcoin development, adopting it for part of the reserve has become a more reliance to store values than those of the stabilized assets such as the US bonds that are negatively influenced by inflation and economy development.

Someday it will happen that most of the banks in the world have a reserve with Bitcoin. It won't just be gold of what they have in their reserve. That is a big possibility that it's only a matter of time of when it will happen. Because the attention that's given to Bitcoin is already high and quite well enough to be recognized to be used in diversification of these establishments. While there is no forcing that's happening for them, it's where the big money is flowing as well so they won't ignore that fact.

Banks are really the ones that will enjoy investing in Bitcoin more because of trout long term foresight they always have when it comes to investing. But can they extend that to Bitcoin which pose a rivalry to them? Actually Bitcoin was only made to be an alternative to them but not to replace them but due to wrong narratives, they’ve also missed out to have invested earlier in this assets. After carefully studying what Bitcoin encompasses, I don’t think banks will be having much issues with adoption Bitcoin and allowing not to be traded through their platforms soon.

Yeah, are banks the most well known for security? I don’t think so. Yes like in cryptocurrency we can compare scams and hacks to robberies in the bank but at least you are the one protecting your money yourself and don’t need to depend on a system you’re not familiar with at all. They are just going to have to accept that volatility is part of bitcoin. If they are going to change so much of it then just don’t hold it in the first place.

Let me tell you things that banking systems do behind us, some of the Banks is trading with Bitcoin without the concept of their customers so for them to do that it is obvious that many of them is serving bitcoin or holding Bitcoin as investment plan in order to make a profit, but they will not make it open to the awareness of government so that they will not be sanctioned because someone of the countries government is not adopting Bitcoin in their country so that is why so many banks do not make it to open when they are holding Bitcoin as a store value to enlarge their banks

I think this is much more than a matter of maintaining de  stability account... banks are creating new paradigms on trust model to supporting this global financial system Why? Well, look... until recently what banks doing hold? Gold, foreign currencies and government bonds, right? These are liquid assets that the entire world readily accept, so the fact that they  hold Bitcoin too means they are trust it,  they recognize the validity of the decentralized network and power of it provide. The problem is what governments think about this... these are assets they cannot control, unlike fiat currency, bonds, interest rates, and others similar. But this is very good for small countries whit poor economy that can reduce their dependence on major powers and have reserves that arent subject to sanctions and manipulation. Anyway... the direction is for Bitcoin to become increasingly accepted, because it already has credibility... the problem are that some governments have creating regulations to try to block its adoption.

If there are no downsides, why aren't central banks interested in adding bitcoin to their national reserves yet? The FED or ECB have even outright stated that they have no interest or intention of adding bitcoin to their national strategic reserves. As far as I know, national reserves need to ensure criteria such as high liquidity, safety and especially stability. Because the purpose of reserves is to be used in case of economic shocks, financial crises...meanwhile, as we all know bitcoin is often dumped whenever there is instability. Clearly, bitcoin is not suitable and does not meet the criteria to become a national reserve.