Bitcoin’s Power Play: How Crypto Is Forcing Central Banks Into a Policy Trilemma

Central bankers used to have it easy—control the money, control the game. Then Bitcoin showed up.

The ultimate disruptor isn't just rattling cages—it's rewriting the rulebook. Suddenly, every monetary policy meeting has to account for the orange elephant in the room.

Capital flight? Check. Inflation hedge? Check. A viable alternative to fiat? Oh, you better believe that's a check.

While bureaucrats debate 'stablecoin frameworks,' Satoshi's creation keeps cutting through red tape like a hot knife through bureaucratic butter. The trilemma's clear: defend your currency, maintain capital flows, or keep monetary sovereignty. Pick two.

Funny how the 'barbarous relic' of our age comes with better monetary policy baked into its code than most central banks have managed in decades. But hey—at least the suits finally get to experience what real financial innovation looks like.

Devaluation of Fiat

There are only a handful of countries that have adopted a national strategic Bitcoin reserve. El Salvador and Bhutan are the two official ones with 6,089 and 13,029 BTC held, respectively.

While several others, such as the United States, the United Kingdom, China, and Ukraine, are unofficially holding the asset but have not declared national reserves.

“The era of fiat optionality is quietly closing, and the game theory around sovereign adoption is heating up,” said crypto YouTuber ‘Professor Crypto.’

Renowned analysts and crypto entrepreneurs such as Anthony Pompliano, Willy Woo, and Arthur Hayes have all predicted that fiat devaluation through money printing will continue.

“The main reason why Bitcoin was made is debasement, fiat money printing by central banks, resulting in hyperinflation,” said WOO in June.

“All major governments are too far in debt; they will have to print and monetize to repay it,” stated Kalypsus Research on Thursday.

“This is why investors are rotating to Bitcoin. It can’t be devalued by governments printing more money.”

China Media Expect More Fiscal Stimulus: BBG

The amount of global debt that will be issued in the next decade will double the current debt load, and central banks will be monetizing it all.

— zerohedge (@zerohedge) July 10, 2025

Slow Adoption, CBDC Push

However, central banks are not likely to rush into embracing Bitcoin just yet. The job of a central bank is to dictate monetary policy, price stability, and control the FLOW of funds within an economy, which includes its citizens.

Bitcoin represents a significant threat to their control mechanisms because people can transact between themselves or through decentralized exchanges without banking and government oversight or control.

The problem is when users want to cash out to fiat, and that is when the banks can regain authority by controlling exit ramps as the chokepoint for governments to exert influence.

Many countries allow regulated crypto trading, which can be taxed, and often restrict crypto payments, which circumvent the banking system.

Additionally, central banks also fear loss of control over the money supply, especially with stablecoins and crypto-dollarization. This is why many are pursuing CBDCs (Central Bank Digital Currencies), Pakistan being the most recent, as highly controllable digital alternatives.