Officials Warn That Holding Bitcoin Would Increase Reserve Risks
The Central Bank of Brazil has dismissed the idea of creating a Strategic Bitcoin Reserve, arguing that such a move would introduce significant risks to the country’s foreign reserve portfolio. The comments were made during the first congressional hearing on Bill 4501/2024, which proposes allowing the central bank to allocate up to 5% of its foreign reserves to Bitcoin (BTC).
Central Bank’s Concerns Over Bitcoin as a Reserve Asset
Luís Guilherme Siciliano, head of the International Reserves Department at the central bank, stated that the institution’s current framework does not recognize Bitcoin as a reserve asset. He explained:
“The IMF classifies Bitcoin as a non-financial, non-produced asset, similar to land and mineral resources. This means Bitcoin is treated as a capital instrument, not a financial instrument or reserve asset.”
Siciliano further noted that only 3% of central banks globally are even considering Bitcoin for reserves, making such an approach highly unconventional. According to internal risk assessments, allocating 5% of Brazil’s reserves to Bitcoin would increase exposure to volatility and uncertainty, given the incompatibility with traditional reserve management practices.
On the other side of the debate, Pedro Guerra, Chief of Staff of the Ministry of Development, Industry, Commerce, and Services, argued that the adoption of Bitcoin could position Brazil as a global leader in financial innovation. “The adoption of Bitcoin is a revolution for public finances. Brazil becomes a strategic player in leadership; we can effectively take the lead and realign the incentives of our economy,” Guerra stated.
What’s Next for Bill 4501/2024?
The proposal remains under review and will require approval from both the Chamber of Deputies and the Senate before it can become law. Lawmakers are expected to continue evaluating the economic, legal, and risk implications of introducing Bitcoin into Brazil’s foreign reserves.
Bottom line: While proponents see Bitcoin as a strategic tool for innovation, the central bank maintains that the risks outweigh potential benefits, setting the stage for a heated policy debate in the coming months.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.