By Brett Munster
Central banks are now saying the quiet part out loud
The Bank for International Settlements (BIS)—headquartered in Basel, Switzerland and founded in 1930—is the world’s oldest global financial institution that most people have never heard of. Often referred to as the “central bank for central banks,” the BIS plays a behind-the-scenes role in shaping global monetary policy and financial stability. So, when this conservative and traditionally cautious institution publishes a detailed report on the role of crypto in cross-border finance, it’s worth paying attention.
In its latest publication, Working Paper No. 1265, titled “DeFiying Gravity?”, the BIS takes a data-driven look at how cryptoassets like bitcoin, Ether, and stablecoins are being used around the world. The paper covers trends from 2017 through early 2024 and reveals a message that many in the crypto space have known for years: crypto isn’t just about speculation—it’s increasingly being used as a practical tool, especially in regions facing economic instability.
What the BIS finds is clear: when inflation surges, remittance costs spike, or governments impose capital controls, people turn to crypto. Bitcoin usage in particular rises sharply during these periods of financial stress. While some of that activity is still speculative, a significant portion—especially smaller transactions—is being driven by necessity. People are using crypto to navigate unreliable banking systems, avoid exorbitant fees, and safeguard their savings in ways their national currencies often can’t.
Perhaps the most striking takeaway is the BIS’s acknowledgment that bitcoin is increasingly being used as a medium of exchange—not just as a store of value or speculative asset. In plain terms, more and more people are using bitcoin and stablecoins to pay for goods, send remittances, and manage daily financial life. For many, these digital assets aren’t exotic investments—they’re tools for financial survival. And when you compare the cost of sending money via traditional remittance services—often with high fees and slow delivery times—crypto frequently offers a faster, cheaper, and more accessible alternative.
Even more telling is how crypto use responds when governments try to suppress it. The BIS notes that when capital controls are enacted—measures meant to limit how much money can leave a country—crypto activity doesn’t decline. It increases. Because decentralized networks operate beyond the reach of centralized authority, people continue to move value across borders when traditional systems are locked down. As the BIS puts it, when the cost of using local fiat currencies becomes too high, people naturally seek alternatives. And increasingly, that alternative is crypto.
This recognition from the BIS isn’t necessarily a revelation for those within the crypto industry. Bitcoiners, analysts, and developers have been documenting and discussing these dynamics for years. In fact, this newsletter has been highlighting these trends since its inception nearly four years ago. What’s new—and significant—is that the BIS is now publicly stating what many have long known. This is an institution created to support and protect the traditional banking world, including many of the very entities that see bitcoin as a threat. For the BIS to acknowledge that not only is bitcoin being used globally as a transactional currency, but that attempts to control it often accelerate its adoption, is a major shift in tone.
It’s becoming harder for central banks to ignore what’s happening. As much as they may resist it, they’re beginning to grasp the real-world impact of crypto—and its staying power. That, more than any technical detail or price movement, is the real takeaway from this paper.
US Treasuries are feeling Moody
For the better part of the last half-century, U.S. Treasuries have served as the cornerstone of the global financial system. Considered the gold standard of safe assets, they’ve long been the preferred vehicle for central banks and sovereign institutions looking to preserve capital. Backed by the “full faith and credit” of the U.S. government, Treasuries weren’t just viewed as low-risk—they were perceived as virtually risk-free. Yet growing concerns about fiscal sustainability and political dysfunction are beginning to chip away at that long-standing confidence.
The latest sign of strain came last week, when Moody’s downgraded the U.S. long-term credit rating from AAA to AA1. While the immediate impact may be more symbolic than disruptive, the long-term implications for U.S. Treasuries are significant. For the first time in history, all three major credit rating agencies—S&P, Fitch, and now Moody’s—have downgraded U.S. sovereign debt. In simple terms, the issuer of the world’s reserve currency has officially lost its top tier fiscal rating.
Moody’s cited persistent deficits, an unsustainable debt path, and a paralyzed political system incapable of meaningful fiscal reform as key reasons behind the downgrade. Moody’s explained that the strength of the US economy and deep capital markets are “no longer sufficient to offset worsening fiscal metrics.” Crucially, the government’s ability to respond to future economic shocks or recessions is being severely constrained by its existing obligations.
If this sounds familiar, it should. S&P downgraded the U.S. back in 2011 amid a debt ceiling standoff, citing the lack of a credible plan to stabilize the national debt. Fitch followed suit in 2023, pointing to fiscal erosion and decades of legislative gridlock, especially around entitlement programs like Social Security and Medicare. Now, with all three agencies aligned, the message is unmistakable: U.S. debt is no longer sacrosanct.
And frankly, they’re not wrong.
As we’ve discussed in previous issues of this newsletter, mandatory spending—primarily entitlements and interest payments—now exceeds total federal revenue. That means even if Congress defunded the military, slashed every agency to zero, and turned off the lights in D.C., the U.S. government would still be running a deficit.
The most recent numbers tell an even more sobering story. Through the first six months of this fiscal year, the federal deficit is projected to reach $2.6 trillion in 2025, a 43% increase from the previous year. And that isn’t even the bad news. With 10-year Treasury yields climbing from 3.8% to 4.6%, the government must refinance more than $7 trillion in maturing debt, alongside an additional $2–3 trillion in new annual deficits, all at higher interest rates. This compounds into a vicious cycle: more debt means higher interest payments, which means more borrowing, and so on.
The fiscal outlook could deteriorate further if the proposed tax cuts are passed. According to the latest report by the nonpartisan Congressional Budget Office (CBO) such a policy would add $3.8 trillion to the national debt over the next decade. By the end of Trump’s term, it’s likely that the U.S. will have annual deficits approaching $5 trillion—the size of the emergency COVID stimulus packages but occurring every single year. When crisis-level spending becomes routine, the concept of fiscal discipline becomes a fantasy.
So, while Moody’s downgrade may appear like a formality on the surface, it should be viewed as a glaring warning light for those attuned to long-term capital preservation.
This is also where bitcoin begins to enter the conversation in a meaningful way.
The downgrade doesn’t just raise borrowing costs or dent investor confidence—it challenges the very premise of U.S. Treasuries as the world’s preeminent reserve asset. For decades, the dollar-centric system has worked because it offered stability, liquidity, and above all, trust. But that trust is being chipped away due to fiscal mismanagement, political dysfunction and aggressive use of sanctions.
Open acknowledgment from one of the world’s most trusted credit agencies isn’t the only warning sign. Foreign demand for U.S. Treasuries is already fading, as central banks steadily diversify away from dollar-denominated debt and toward alternative stores of value. Just last week, the U.S. Treasury tried to sell $16 billion in 20-year bonds—and demand fell flat. Uncle Sam had to raise the yield to above 5% to attract buyers. Investors are no longer automatically accepting U.S. debt without question; they’re demanding higher compensation to bear the risk. The weak auction wasn’t merely a case of soft demand—it was a referendum on the U.S.’s deteriorating fiscal path. A typically quiet, low-drama segment of the bond market became a stage for expressing growing global doubt.
As skepticism toward U.S. debt grows, capital isn’t just pulling away from Treasuries—it’s actively seeking alternatives. Gold, the traditional safe haven, continues to play an important role but increasingly, capital is flowing into bitcoin—and for reasons that are more fundamental than speculative.
Bitcoin is not tethered to any nation-state. It doesn’t rely on Congressional budget approvals, doesn’t issue press releases during debt ceiling crises, and doesn’t require bipartisan agreement to maintain its credibility. With a hard cap of 21 million coins, bitcoin offers digital scarcity in an era of infinite fiat creation. Its decentralized nature makes it immune to political manipulation. Its global liquidity and 24/7 market access make it increasingly attractive to institutions, sovereign wealth funds, and even nation-states seeking a neutral, globally accessible reserve asset.
We’re already seeing the early signs of this shift. A handful of governments have begun acquiring bitcoin as a strategic reserve, while others are actively exploring similar moves. Just as gold provided a financial anchor in the 20th century, bitcoin is increasingly viewed as playing a comparable role in the digital age.
That’s not to say bitcoin is risk-free. It remains volatile and subject to large price swings. But in a world where even U.S. Treasuries no longer guarantee safety, investors are beginning to reassess what “risk” really means. The greater danger may not lie in holding bitcoin—but in continuing to rely on a debt-driven system that is structurally incentivized to debase its currency over time.
Moody’s downgrade won’t spell the immediate end of U.S. dollar dominance. But it could mark the beginning of a new chapter—one where Treasuries lose their uncontested status as the global reserve asset. In that transition, bitcoin is uniquely positioned to benefit. The financial world is evolving—and with this downgrade, Moody’s may have just confirmed what forward-looking bitcoiners have long known: the old system is under strain, and the new one is already emerging. And in that transition, bitcoin stands to benefit—perhaps more than any other asset in the world.
Coinbase added to S&P500
For years, I’ve argued that eventually everyone will own crypto—whether they realize it or not. I’ve returned to this idea time and again throughout the history of this newsletter, including just last year. That vision took a major step toward reality on May 19, when Coinbase (COIN) was officially added to the S&P 500 index. This milestone—the first time a crypto-native company has joined the S&P 500—is more than symbolic. It has very real implications for millions of Americans and underscores just how far digital assets have come in gaining mainstream financial legitimacy.
One of the most immediate effects is that millions of investors now have exposure to crypto, often without being aware of it. The S&P 500 is embedded in nearly every pension fund, 401(k), and retirement account. That means anyone with money in an index fund tracking the S&P 500—whether they’re actively managing it or simply riding the market—now indirectly owns a piece of the crypto ecosystem through Coinbase. Even the most die-hard skeptics, like your cousin Jimmy who once called crypto a scam over Thanksgiving dinner, are now unwitting participants in the space. Sorry, not sorry Jimmy.
And this is just the beginning. Strategy (formerly MicroStrategy), which holds an enormous amount of bitcoin on its balance sheet, has climbed to become the 86th largest public company in the U.S. by market cap. Its eventual inclusion in the S&P 500 feels like a question of “when,” not “if.” Beyond that, more crypto companies are preparing to go public, and some will inevitably grow large enough to earn a spot in the index. As this continues, the share of the S&P 500 made up of crypto-related firms will expand, meaning that the financial exposure Americans have to this sector will grow over time.
Coinbase’s entry also highlights how dramatically the regulatory landscape has shifted. Just months ago, the company was still locked in a legal battle with the SEC. That lawsuit was dismissed in February and now Coinbase is joining the most important financial benchmark in the world. This rapid reversal illustrates the profound impact of the regulatory pivot under the Trump administration.
There’s one final detail that puts a poetic flourish on the moment. In order for Coinbase to join the S&P 500, it had to replace another company. That company? Discover Financial Services (DFS), a legacy credit card issuer now being acquired by Capital One. In a beautiful twist of fate, the first crypto firm to enter the S&P 500 is doing so at the expense of a traditional financial institution. A company that embodies the future is quite literally taking the place of one rooted in the past. Chef’s kiss.
Coinbase’s inclusion in the S&P 500 isn’t just a milestone—it’s proof that the future we’ve been anticipating is arriving faster than most expected. We are now firmly on the path toward a world where virtually everyone will own crypto, whether they set out to or not. It’s no longer a question of if this will happen, but how quickly and how deeply it will take root. For those of us who have been making this case for years, this moment is a powerful validation.
In Other News
Crypto industry cheers progress on ‘historic’ stablecoin legislation as Senate advances GENIUS Act.
SEC Chair Paul Atkins unveils his vision for crypto regulation as the agency charts a friendlier approach to digital assets.
JPMorgan says bitcoin likely to have more upside than gold in H2 2025.
Crypto M&A picks up in May.
Bitcoin hits new record high.
Texas moves to establish a strategic bitcoin reserve.
Bitcoin and Ethereum ETFs notch highest combined daily inflows since January.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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