Taiwan holds $605 billion in foreign reserves. More than 80% of the total sits in U.S. dollar-denominated assets. The Bitcoin Policy Institute just published a report — backed by analysis from a U.S. Department of Defense analyst — arguing Taiwan should allocate 5% of its reserves to Bitcoin. Four months ago, the Central Bank of the Republic of China rejected a similar proposal. Now the argument has returned, sharper and more specific. The CBC’s position still doesn’t hold up.
Start with the actual problem, because institutional debate tends to obscure it. Taiwan’s reserve portfolio carries no real diversification. It functions as an enormous, generational bet on the continued purchasing power of the U.S. dollar — a currency managed by a government currently carrying more than $36 trillion in debt, running structural deficits with no credible correction in sight, and presiding over a Federal Reserve that has expanded its balance sheet in extraordinary ways since 2008. Every major financial crisis in recent memory ended with more liquidity injected into the system, not less. Dollar debasement stopped being a fringe idea years ago. Deutsche Bank covers it. The IMF covers it. U.S. government memoranda cover it.
Taiwan denominates between 85 and 90% of its exports in dollars and parks the overwhelming majority of its reserves in U.S. Treasuries. If dollar purchasing power erodes gradually over time — as it has done before — Taiwan doesn’t lose an abstract yield differential. It loses wealth accumulated over decades. The CBC’s comfort with over 80% concentration in a single currency is, by any conventional risk management standard, an unusual choice that deserves more scrutiny than it receives.
The CBC rejected the December 2025 proposal on three grounds: Bitcoin carries too much volatility, the market lacks sufficient liquidity for a portfolio at scale, and custody plus compliance risks run too high. Each objection contains some truth. None of them answers the actual question.
Volatility: a 5% allocation in a $605 billion portfolio means the CBC could absorb a 50% Bitcoin correction and lose roughly 2.5% of total reserves. Compare that to the scenario multiple analysts now consider plausible — a 15 to 20% dollar depreciation over a medium-term horizon — which would strike the other 80% of the portfolio with devastating arithmetic. Applying the volatility argument asymmetrically to Bitcoin while ignoring currency risk isn’t analysis. It’s selective attention dressed up as prudence.
Liquidity: Bitcoin’s spot market moves tens of billions of dollars daily. It falls short of the most liquid instruments available, but it exceeds the liquidity of a range of assets central banks routinely carry without raising alarms. The objection applies at the margins, not at the scale of a 5% allocation.
Custody and operational security: three years ago, institutional Bitcoin custody was genuinely immature. Today, regulated custodians operate across multiple jurisdictions, multisignature architectures allow institutional control without dependence on any single third party, and the U.S. government itself manages over 200,000 Bitcoin acquired through asset seizures. The infrastructure argument no longer carries weight. What remains of the CBC’s resistance is not technical. It is institutional.
The Argument Central Banks Refuse to Name
A specific scenario rarely appears in official reserve management documents, not because it seems implausible, but because naming it would require acknowledging a vulnerability nobody wants to put in writing. Langenkamp’s report names it directly: what happens to Taiwan’s reserves if China imposes a naval blockade?
U.S. Treasury bonds held in New York remain legally valid but operationally inaccessible. Gold stored in foreign vaults becomes impossible to repatriate. Dollar correspondent accounts can freeze under financial sanctions or operational disruption. Five years ago, the blockade scenario belonged in academic war game literature. Today it appears in the risk assessments of serious geopolitical institutions, including some inside the U.S. defense establishment itself.
Bitcoin is the only reserve asset that crosses any blockade without crossing any port. No custodian in a third-party country. No correspondent bank. No foreign clearing chamber that can be closed or sanctioned. With a properly configured multisignature setup — something fully implementable at institutional scale right now — Taiwan could maintain operational access to a portion of its reserves even under extreme circumstances. No other asset provides the same combination of characteristics: fixed supply, no central bank control, global accessibility, and transferability without intermediaries. The financial case for Bitcoin in sovereign portfolios is interesting. The sovereignty case runs deeper.
The geopolitical signal coming from the United States reinforces the argument. President Trump’s executive order creating the Strategic Bitcoin Reserve in March 2025 was not primarily about the amount involved — the initial holdings came from confiscated assets, not open-market purchases. The real weight of the order lay in its classification: the issuing country of the world’s dominant reserve currency officially designated Bitcoin as a legitimate sovereign asset. Since then, Japan has examined potential allocations from its $1.5 trillion pension fund. Twenty-nine countries now carry some form of sovereign Bitcoin exposure. Taiwan’s own legislature already has a lawmaker — Ko Ju-chun — who has pushed the CBC on the question for over a year with increasingly specific arguments and increasingly solid data.
Taiwan isn’t receiving pressure from speculators and social media. It receives pressure from the institutional center of the global financial order.
And Taiwan’s own record on the subject undercuts the CBC’s public stance. The Financial Supervisory Commission has a digital asset custody pilot already running. The country holds approximately 210 Bitcoin from asset seizures, which places it among the top ten sovereign Bitcoin holders in the world. Claiming no institutional relationship with Bitcoin while sitting inside a top-ten sovereign position is a difficult rhetorical posture to maintain for long.
History shows how central banks actually change course. Rejection comes first. Then study. Then pilots. Then gradual allocation, always framed as prudent adaptation rather than ideological reversal. The CBC already rejected. The study phase runs now. The pilot is live. The only remaining question is how much reserve value Taiwan leaves on the table while the institution searches for the language to call the next step a natural evolution.
The dollar concentration is the risk. Bitcoin at 5% is the hedge. The CBC’s objections don’t survive serious scrutiny, and the longer the bank waits, the more expensive the lesson.
