Bitcoin’s role in the future of finance is more nuanced than you think

The debate about bitcoin’s role in the global financial system too often falls into rigid categories: alternative currency, digital gold, inflation hedge or systemic threat. Yet some, including researchers at the European Central Bank, argue that bitcoin is pure speculation, unsuitable for investment and has a fair value of zero.

For more than a decade, we have seen regular market cycles, institutional adoption, regulatory evolution as well as a highly emotional public debate about bitcoin’s role in society — often associating it with speculation, fraud and ESG concerns. The reality is more nuanced. I argue that bitcoin has evolved to serve a range of different purposes for different constituencies, and its impact will unfold through parallel paths rather than a single breakthrough.

The idealists’ dream of bitcoin replacing the dollar as a global reserve currency remains highly unlikely. As BlackRock Vice Chairman and former central banker Philipp Hildebrand noted recently, governments simply won’t allow it. Two central characteristics of a functioning state are the monopoly on military action and sovereignty over currency. History shows that central banks will leverage all their regulatory and economic might to maintain monetary control — from Roosevelt’s 1933 ban on private gold ownership to today’s development of central bank digital currencies.

Make no mistake, bitcoin is playing several important roles. In emerging markets where currencies suffer from inflation and trust in institutions is low, it serves as a practical medium of exchange. El Salvador’s plans to use bitcoin-backed bonds to pay down sovereign debt and Argentina’s growing crypto adoption prove that some nations are embracing cryptocurrency rather than fighting it. This trend could accelerate following Trump’s campaign pledge to establish a bitcoin strategic reserve, which raises the possibility of bitcoin being used as an anti-fragile “reserve asset.” Such a move could trigger game theory-like forces pushing other countries to follow suit, leading to a future where bitcoin partially backs national currencies — in a logic similar to the pre-Bretton Woods gold standard.

The “digital gold” narrative, while compelling, is incomplete. Yes, bitcoin’s fixed supply and decentralization make it an appealing hedge against monetary expansion. Its advantages over gold include capped supply, greater liquidity and superior verifiability. But this narrow view misses bitcoin’s unique cultural significance, particularly among younger generations who see it as a statement about governance and decentralization and a new form of ownership.

Bitcoin’s position outside the traditional financial system could make it an important safe haven if mounting global challenges — record debt levels, rising geopolitical tensions and increasing protectionism — lead to systemic crisis. In an increasingly de-globalized world with politicized currencies, bitcoin as neutral money could become a common denominator between opposing blocks.

However, the most likely path forward is continued gradual integration. We’re seeing this through maturing institutional infrastructure, comprehensive regulatory frameworks like MiCA in Europe and growing adoption by traditional financial institutions. The real transformation isn’t bitcoin replacing the existing system but spurring its modernization.

What makes bitcoin unique is precisely this multiplicity of roles — an inflation hedge for investors, an alternative currency in emerging markets and a bridge to a more efficient financial system. Its flexibility suggests that while bitcoin may not fulfill any single narrative completely, it is increasingly embedding itself in the global financial landscape, both through its neutrality and the ways that it continues to provoke emotional debates.

For traditional institutions and regulators, this means moving beyond binary thinking about bitcoin’s relevance. Instead, they should focus on building frameworks that accommodate its diverse functions while managing risks appropriately. Switzerland, in the spirit of its direct democracy and subsidiarity principles, has created the necessary regulatory and legal frameworks for the digital asset industry to innovate, create jobs and mature over the last few years, though it is now losing ground to other hubs, including the U.S. in the upcoming Trump term, and fast. A wake-up call is needed.

For investors, understanding bitcoin’s multifaceted value proposition is crucial. While allocating capital to bitcoin remains “risky,” the potential nonlinear positive developments make it significantly “more risky” to ignore it entirely.

The future of bitcoin isn’t a winner-takes-all scenario where it either replaces the existing financial system or fails entirely. Instead, it’s evolving into a multifaceted financial technology serving different purposes for different users. This adaptability, rather than any single role, will likely prove to be bitcoin’s most disruptive characteristic.