Bitcoin to the rescue? A gamble in the global economic predicament

Countries in distress are betting everything on Bitcoin?

Written by: Thejaswini M A

Compile: Block unicorn

Preface

The blockchain and cryptocurrency minister of Pakistan announced on May 28 at the Bitcoin 2025 conference in Las Vegas that they have established a strategic Bitcoin reserve.

The country that claimed "cryptocurrency will never be legal" a few years ago has suddenly done a 180-degree turn, promising never to sell their Bitcoin holdings. Minister Bilal Bin Saqib stated: "The Bitcoin wallet of this country is not for speculation or hype; we will hold these Bitcoins and never sell them."

Not only Pakistan, but Ukraine also hopes to incorporate cryptocurrency into its national reserves.

Brazil is also considering allocating 5% of its foreign exchange reserves to Bitcoin.

We are witnessing the rise of a strategic Bitcoin economy, with countries actively adopting Bitcoin as a modern treasury tool.

So is this financial innovation driven by opportunity or necessity?

This model has become impossible to ignore. Since the Trump administration expressed support for the U.S. strategic Bitcoin reserves in March 2025.

Ukraine is still at war and submitted Bill No. 13356 to Parliament on June 11, allowing its central bank to incorporate cryptocurrencies into the national reserves.

Brazil has followed closely with the proposal of "RESBit," which may allocate up to 5% of its foreign exchange reserves to Bitcoin. Even the mayor of Panama City hinted mysteriously at a "Bitcoin reserve" after meeting with Bitcoin advocates from El Salvador in May.

Then there is El Salvador, also a model of this initiative. Despite signing a $1.4 billion loan agreement with the International Monetary Fund (IMF) in December 2024, which explicitly discourages further accumulation of Bitcoin, they are still quietly continuing to purchase Bitcoin daily. Since the agreement was reached, they have added 240 BTC, and President Bukele's government has maintained "technical compliance" in some way through the IMF's so-called "flexible interpretation."

They are looking for creative ways to continue buying Bitcoin while maintaining the liquidity of IMF funds.

All-in Strategy

These countries are following what I call the "all-in strategy"—strategically betting on emerging financial technologies that show potential when traditional economic policies are stagnating.

Pakistan has allocated 2000 megawatts of electricity for Bitcoin mining and artificial intelligence data centers, turning its power grid into a cryptocurrency casino. The minister announced, "We welcome all miners to come to Pakistan," as if foreign miners using the electricity could solve economic problems.

The reasoning sounds compelling: Bitcoin's limited supply can withstand inflation, decentralization provides independence from traditional finance, and its recent performance looks like a magical economic bullet.

When Pakistan talks about "100 million unbanked people" and how cryptocurrency helps them "break the economic class," it represents a genuine policy response to financial inclusion that traditional banking has yet to address.

These countries are making Bitcoin the core of their economic strategy.

Economic Innovation Index

Why do struggling economies turn to Bitcoin? The answer lies in their fundamental currency challenges. Traditional currencies in developing countries face three major survival threats that Bitcoin can theoretically address:

Between 2020 and 2024, the inflation rate in the United States rose by 20%, while Bitcoin increased by over 1000%. This mathematical calculation is very appealing for countries with higher inflation rates.

Look at the countries that are leading the charge, and you will find a pattern. They are countries facing serious structural challenges.

Pakistan Reality Check: The Pakistani economy is in a fragile stability phase after barely avoiding a crisis. The GDP growth for FY 2025 is only 2.6-2.8%, far below the government’s initial target of 3.6%. The country faces significant structural issues, with over 100 million citizens lacking bank accounts, widespread financial exclusion, and an economy that had contracted before a recent modest recovery. The per capita income is only $1824.

Ukraine's War Economy: Despite achieving management stability through substantial foreign aid, the Ukrainian economy remains severely battered. The country's GDP shrank by nearly 30% in 2022, with growth forecasts for 2025 at only 2-3%. Ongoing conflict has destroyed 70% of energy infrastructure, damaged 13% of housing stock, and displaced millions of workers, leading to a severe labor shortage. Poverty affects 9 million Ukrainians, and the reconstruction needs over the next decade are estimated at $524 billion. Legislators are exploring Bitcoin reserves as an asset that is unaffected by traditional financial systems to help "strengthen macroeconomic stability" in an economy entirely reliant on foreign support.

El Salvador's risky bet: The economy relies heavily on remittances, which account for over 20% of GDP, making it susceptible to external shocks. The average annual growth rate is only 2-3%, with growth forecasts slowing to 2.2-2.5% in 2025. The country faces ongoing challenges, including a fiscal deficit, a peak public debt of up to 88.9% of GDP, and low productivity.

Bhutan's Bitcoin Lifeline: The Bhutanese economy is facing a devastating "brain drain," with over 10% of technical workers leaving in just 2022, and a youth unemployment rate as high as 19%. The tourism sector has struggled to recover after the COVID-19 pandemic. What measures is this landlocked kingdom taking? They are leveraging excess hydropower resources to mine Bitcoin and using the proceeds to double civil servant salaries. According to data from Arkham Intelligence, Bhutan's Bitcoin holdings are worth over $600 million, accounting for 30% of the national GDP. Bhutan has essentially shifted from measuring development levels by "Gross National Happiness" to betting its economic future on cryptocurrency mining.

Brazil's hedging policy: Brazil's economic situation is more complex, with economic growth slowing but not yet in crisis. After a strong growth of 3.4% in 2024, GDP growth for 2025 is expected to slow significantly to 2.1-2.3%, due to tightening monetary policy and reduced fiscal stimulus. The central bank's benchmark interest rate remains high at 14.75% to combat inflation still above the 3% target, while increasing social spending and structural issues pose ongoing fiscal risks. Brazil is considering allocating 5% of its foreign exchange reserves to Bitcoin through PL 4501/2023, reflecting concerns over reliance on fiat currency and a desire for portfolio diversification.

Do you call it despair? This is how I view the issue: these countries recognize the potential of Bitcoin as a strategic asset class and incorporate it as an innovative component of their monetary policy.

When faced with long-term inflation, currency devaluation, and limited access to traditional safe-haven assets, Bitcoin begins to no longer seem like speculation, but rather a pragmatic hedging tool.

Academic research supports this view. As James Butterfill's analysis shows, after the halving in 2024, the annualized inflation rate of Bitcoin has dropped to just 0.83%, and it continues to decline further after each halving, while the annual average inflation rate of global fiat currencies is 2-5%. This mathematical certainty is very appealing to those countries that watch their purchasing power decline year after year.

What about the stories from the corporate side? We have seen that 240 listed companies have included Bitcoin in their balance sheets, whereas just a few weeks ago this number was only 124. This is an acknowledgment of the changes in the monetary landscape by institutions.

Developing countries are already aware

Although the announcement of Bitcoin reserves in Pakistan and Ukraine seems sudden, it actually follows a strategy that has been quietly validated in developing countries for many years. The roots of these motivations lie in the economic realities these countries face every day.

When the purchasing power of a country's currency continues to decline, the fixed supply of Bitcoin is no longer just a technical feature, but a lifeline. Countries that have long experienced inflation have seen that, due to the inability of their currency to maintain value over the long term, citizens naturally tend to use Bitcoin as a means of storing value. This is because traditional monetary systems cannot provide the stability they need.

The population of Nigeria, Kenya, Vietnam, and other developing countries has embraced Bitcoin. When governments can print local currency without limits, an asset with a total supply cap of 21 million units starts to look like a sound monetary policy.

Traditional banking systems in developing countries often exclude large populations due to documentation requirements, minimum balance thresholds, or lack of infrastructure. Bitcoin does not require your credit score, nor does it require you to maintain a minimum balance. All you need is an internet connection and a mobile phone.

Those who are shut out by traditional financial services have found that they can participate in global commerce, receive remittances, and build savings through cryptocurrency platforms. Bitcoin provides financial services for those underserved by traditional banking.

Many developing countries implement strict capital controls that limit citizens' ability to access foreign currency or transfer funds internationally. Bitcoin operates outside of these restrictions, providing a pathway to global financial markets that traditional systems cannot offer.

Remittance case of El Salvador: Suppose El Salvador receives about $10 billion in remittances annually, and traditional services charge an average fee of 10%, which means that $1 billion flows to intermediaries like Western Union and MoneyGram each year, instead of reaching the families in El Salvador.

If using Bitcoin and stablecoins for transfers reduces fees to 2-3%, the same remittance would only cost between 200 million to 300 million dollars — potentially saving 700 million to 800 million dollars annually, which could go directly into the local economy. For a country with a GDP of about 32 billion dollars, this amounts to over 2% of total economic output being retained rather than lost to transaction costs.

Bitcoin-based transfers can significantly reduce these costs, which means more funds can truly reach the families in need of help.

The trend in corporate balance sheets that we are seeing now is actually an acknowledgment by institutions of a phenomenon that individual users in developing countries discovered many years ago: when traditional financial options are limited or expensive, Bitcoin serves as a practical financial infrastructure rather than "speculation."

Our View

Risk deserves attention.

Of course, this strategy is not without risks, and we should pay attention to the potential issues that may arise.

As James Butterfill pointed out, the 165% annualized return of Bitcoin since 2009 makes it quite attractive. But this performance has occurred during an unprecedented period of monetary expansion and risk appetite. What might happen if this environment changes?

If the correlation between Bitcoin and traditional markets increases during a significant economic recession as it has in the past, these reserves may not provide the diversification benefits that countries expect. Assets that were supposed to hedge against systemic risks might instead amplify those risks.

There are also factors of concentrated risk. If each struggling economy follows the same strategy, we may see a situation where the countries that need stability the most are also the ones most susceptible to the fluctuations of cryptocurrencies.

However, the first countries to adopt Bitcoin reserves are positioning themselves at the forefront of currency transformation, which could define the next decade. If this trend continues and Bitcoin proves its resilience in economic stress tests, early adopters like El Salvador, Pakistan, and Ukraine will establish strategic advantages in digital asset holdings and blockchain infrastructure.

The regulatory environment seems to be increasingly supportive of this trend, with the United States committed to its strategic Bitcoin reserves, while other major economies are also exploring similar frameworks. Widespread institutional adoption will not create systemic risks; rather, it will validate Bitcoin's position as a legitimate reserve asset and create network effects, making these early strategic decisions appear visionary.