Bitcoin is playing role of gold in the crypto universe.
Bitcoin's "digital gold" narrative: similarities and differences
Bitcoin is often referred to as "digital gold" in the cryptocurrency sphere due to certain characteristics it shares with the traditional safe haven asset.
Here's a breakdown:
Similarities
Scarcity: Both Bitcoin and gold have a limited supply, contributing to their value. Bitcoin has a fixed supply cap of 21 million coins, while gold's supply is finite due to the limitations of mining.
Decentralization/Resistance to Inflation: Bitcoin's decentralized nature and fixed supply make it appealing as a potential hedge against inflation and devaluation of fiat currencies controlled by central authorities, according to Sound Mind Investing. Gold also historically acts as a hedge against inflation.
Store of Value: Both assets are viewed as potential stores of value, with investors seeking them out during periods of economic or geopolitical uncertainty.
No Correlation (Historically): Bitcoin has historically been uncorrelated with major asset classes, making it a potential diversifier in a portfolio, according to Nasdaq.
Divisibility: Bitcoin is easily divisible into smaller units (satoshis), unlike physical gold.
Portability: Bitcoin, being digital, can be transferred instantly across borders, unlike physical gold which faces logistical challenges and costs associated with secure storage and transportation.
Differences
Volatility: Bitcoin has historically exhibited much higher price volatility compared to gold, making it a higher-risk investment, particularly in the short term.
History & Track Record: Gold has a long and proven track record spanning millennia as a store of value, while Bitcoin has existed for a relatively short time (since 2009).
Tangible vs. Digital: Gold is a physical asset with inherent value, while Bitcoin is purely digital.
Utility beyond Store of Value: Gold has various real-world applications, including jewelry, industrial uses, and electronics. Bitcoin, at present, has limited utility beyond its function as a medium of exchange and store of value.
Regulation: Bitcoin has faced a more uncertain regulatory environment compared to gold, although this landscape is evolving.
Conclusion
While Bitcoin shares some characteristics with gold, leading to the "digital gold" moniker, it's important to recognize the differences. Bitcoin's unique properties, particularly its digital nature and potential for rapid growth, are driving increasing interest from investors and institutions. However, its higher volatility and shorter track record differentiate it from traditional gold investments. Both assets can potentially be part of a diversified portfolio, depending on an individual investor's risk tolerance and investment goals.
"Is crypto the same as Bitcoin?
In fact, it is stablecoins that are gaining increasing practical significance. The transformation of the monetary system seems to have begun.
Beyond the die-hard fans, anyone who says crypto usually thinks of Bitcoin – after all, it accounts for two-thirds of the market capitalization of all cryptocoins. Only a few other coins play a role: 90 percent of the market capitalization is accounted for by just seven of more than 18,000 coins.
These seven big coins include two so-called stablecoins, Tether and USDC. These connect Web 3, the "Internet of Value," in which digital exchange and trading is a constitutive element and which has specifically invented cryptocurrencies for this purpose, with the non-digital "fiat" monetary system by representing currencies from it.
At around $263 billion, stablecoins only account for 7.5 percent of crypto capitalization. But this obscures their true significance. They account for more than 40 percent of trading volume. According to an analysis by DB Research, stablecoins are involved in more than two-thirds of all crypto transactions – according to analysts Marion Laboure and Camilla Siazon, this shows how integral they are to liquidity and price stability. They estimate last year's transaction volume at $27.6 trillion, more than the volume of global Visa and Mastercard transactions combined. Four years earlier, stablecoin volume was not even significant.
Especially in emerging markets, usage has grown beyond crypto trading. According to a survey by the credit card company Visa, this remains the primary motive. However, in Nigeria and Turkey, for example, stablecoins are being used even more to save dollars, while in Indonesia they are valued for their more favorable exchange rates. In many African countries, they even serve as a substitute for companies lacking foreign currency.
Peter Grosskopf, Chief Technology Officer of All Unity, a consortium that will soon launch a new euro stablecoin, the EURAU. In an interview with the Frankfurter Allgemeine Zeitung (FAZ), the Swiss Federal Institute of Technology (FAZ) plans to launch a blockchain-based asset management company, DWS, in which, among others, the Deutsche Bank-owned investment company is significantly involved, sees four main uses for stablecoins. Two of them, namely as a means of (crypto) transfers and as a store of value, are already of great importance today. There is currently a lot of imagination for the third use, use in securities trading. The volume is still small, but in two years it could certainly reach a significant size. The European Banking Authority (ESMA) has just advocated for making the temporary legal framework (pilot regime) for European securities trading on the blockchain a permanent institution.
Everyday or financial market currency?
Grosskopf sees the fourth use case in their use as a means of payment in everyday life. "Stablecoins also have a head start here. They are already here today."
The digital euro is still a long way off and, as things stand today, will amount to little more than a cash card plus," he says.
In Switzerland, they are already one step further. "The integration of stablecoins into the Spar Group's payment system shows that the path to the mass market is no longer a futuristic idea, but a reality in everyday checkout operations," says Cyrill Thommen, founder of the crypto infrastructure provider DFX.swiss.
Retailers are looking for solutions to break away from traditional payment providers. This involves clear operational advantages such as real-time processing or complete checkout integration.
Grosskopf doesn't want to go that far yet. But the crypto world is going through different development phases, and the question is always what will happen in the near future.
He currently sees more opportunities in securities trading. "Stablecoins were the first end product, the first crypto product for end customers or companies. Trading tokenized—in simple terms, digitized—assets via blockchain-based stablecoins has many advantages. This starts with the fact that there is always a clear owner, and something like cum-ex would be impossible," he says.
Mass market use also presents an opportunity for stablecoins pegged to currencies other than the dollar. "The closer they get to mass adoption, the more users will demand coins in local currencies," Grosskopf is convinced.
Such an impetus is necessary. Because Web 3, with a 97 percent share of dollar stablecoins, is a dollar world. Euro stablecoins have a capitalization of less than $500 million. "At the beginning of the crypto world, there was the vision of a global currency market," says Grosskopf. "Even though the US Federal Reserve didn't do anything about it, Tether and USDC started the process and absorbed everything."
The two major coins are the dominant stablecoins, with shares of more than 60 and almost 25 percent, respectively. The reason is simply that users prefer them as the most liquid options, according to the Visa study. Other stablecoins such as True USD or DAI were only able to gain greater importance temporarily. USDS, currently number three in the market, has a market share of less than three percent.
The Visa survey reveals further reasons: The dollar is the global reserve currency and attractive compared to many other currencies, even outside the US. Furthermore, there are few regulatory hurdles to the use of dollar stablecoins.
The US has now recognized this as an opportunity. For the crypto-friendly Trump administration, they are a private-sector solution for digital money. The hope of limiting the power of the US Federal Reserve is likely to play a role, at least in part. By allowing stablecoins, the US could strengthen the dollar, which has safe-haven characteristics in many countries, according to DB Research.
After regulation remained blocked in Congress for a long time, a stablecoin ecosystem is now set to become a reality, in which all stablecoins must be secured with short-term dollar-denominated debt. The corresponding legislation, dubbed the "Genius Act," initially failed in Congress, partly due to concerns that Trump might want to profit personally. In any case, the Arab investor MGX is said to have used the USD1 stablecoin issued by the Trump family company World Liberty to invest two billion dollars in the crypto exchange Binance.
The Genius Act was finally passed in mid-June. DB Research expects that the legislation will also put pressure on the non-US issuer Tether to comply with this regulation or risk being excluded from the US market. USDC from the Circle consortium, which recently had a highly successful IPO, is already a US company and has now applied for a national trust bank license. Ryan Lee, chief analyst at Bitget Research, considers this a crucial step. Combined with the Genius Act, this creates the conditions to make USDC a central instrument in global finance. Ripple, which is planning a stablecoin, has now also applied for a banking license.
EU loses lead
Hong Kong also recently passed licensing legislation; the first applications are expected by the end of the year.
In the UK, the FCA regulatory authority published proposals for establishing a British stablecoin regime, responding to a bill that the Bank of England also plans to comment on later this year. The FCA is responding positively: Stablecoins have the potential to increase the efficiency of payments and settlements.
The EU, with its former regulatory pioneer, the MICA Regulation, is in danger of losing momentum, says Michael Wild, Managing Director of the dEuro Association, which launched a euro stablecoin, the dEuro (decentralized euro), in the spring. Regulatory spaces are finally needed in which these solutions can also be scaled.
The dEuro is intended to establish itself as a savings and credit currency for consumers, Wild said in an interview with the Frankfurter Allgemeine Zeitung. Unlike Tether and USDC, it is collateralized with cryptocoins that users can deposit to borrow dEuro or have them locked in the system for an interest rate currently of ten percent. "The best thing about the dEuro is that, as its name suggests, it is completely decentralized," says Thommen, who is chairman of the board of directors of the dEuro Association. "We offer decentralized banking unlike anything else in the euro or dollar market." The game is not yet decided in the eurozone. High interest rates and overcollateralization are intended to convince users.
Decisions regarding the dEuro protocol are up to the holders of another token, the nDEPS token, which is comparable to stocks, while the Association sees itself as an initiator that puts forward proposals. This decentralization has a catch: According to Mica, such a decentralized structure is not permitted. This explains why the association is headquartered in Zug, Switzerland, outside the eurozone.
"We are in contact with the regulators and are aligning ourselves with the MICA regulations as best we can," says Wild. "We are completely transparent, and our users have full access to the protocol. With other providers, they have access to the code at any time."
Grosskopf, however, is rather skeptical of a Web 3-typical, decentralized structure: "Regulation is either zero or one. There's no such thing as a little. MICA is the EU standard, and there's no point in being as unregulated as possible." EURAU will also be fully MICA-compliant. However, automation and decentralization are an exciting prospect, says Grosskopf. "I'm a bit divided," he admits. "But existing mentalities are difficult to break. I think companies, in particular, will prefer stablecoins that are clearly regulated."
The EURAU is more than symbolic politics, emphasizes Ulli Spankowski, CEO of Bison, the crypto trading app of the Stuttgart Stock Exchange. "It's about applicability in payments, MICA-compliant infrastructure, and the trust of institutional investors. This is a very important development for Europe to break its dependence on US dollar-denominated stablecoins."
Concerns about systemic risks
Even though the establishment of stablecoins seems almost unstoppable, there is no shortage of warnings. The Bank for International Settlements (BIS) recently stated in its annual economic report that these currencies inadequately fulfill the basic principles of a stable currency and, without appropriate regulation, pose a risk to financial stability. They lack acceptance as a means of payment at face value, the ability to prevent defaults and provide liquidity, and protection against financial crime. They are more like financial assets than money.
The BIS advocates for digital central bank money, a path that is increasingly emerging in the EU and on which the ECB is currently accelerating. In addition to the digital euro as a means of payment, it has just announced its "Pontes" and "Appia" initiatives, a two-phase strategy for settling financial market transactions using blockchain-based central bank money.
The renewed momentum for a digital euro could also be related to the central bank's fundamental concerns about reduced monetary policy capacity, given the declining importance of cash – and the momentum of stablecoins.
The BIS also sees the use of stablecoins as a creeping dollarization, which not only threatens the monetary sovereignty of smaller countries but could also lead to a potentially uncontrolled expansion of the dollar money supply.
DB Research sees a potential systemic risk. With dollar reserves of $120 billion, stablecoin providers are essentially money market funds that support the short-term debt market and channel liquidity into the dollar. Tether alone, with $98.5 billion (as of March), is one of the largest foreign holders of US Treasuries. Five years ago, this position was almost zero. The continued increase in the importance of stablecoins could shift the structure of US Treasuries toward short-term securities as demand grows. If a stablecoin then loses its peg to the dollar and a massive flight from a major coin occurs, this could put a significant strain on prices, as issuers would have to sell on a large scale.” [1]
Stablecoins, when issued by the governments, are used to spy on private citizens. USA ruling party, Trump’s party, is for personal freedom, therefore is against this spying.
Some sources express concerns that Central Bank Digital Currencies (CBDCs), if not designed with robust privacy safeguards, could be used by governments to monitor and control the financial transactions of private citizens,
These concerns center on the potential for CBDCs to enable extensive government surveillance of spending habits, locations, and other personal financial data, potentially leading to the creation of detailed individual financial profiles.
Donald Trump and the Republican stance
President Donald Trump has been a vocal opponent of a US Central Bank Digital Currency (CBDC), stating during his campaign that he would "never allow the creation of a central bank digital currency".
Trump and many Republicans express concern that a CBDC could become a tool for government surveillance and control, eroding Americans' financial freedom.
The Trump administration has issued an executive order prohibiting federal agencies from pursuing a CBDC.
Republicans in the House of Representatives have also passed the Anti-CBDC Surveillance State Act (H.R. 1919) to prevent the Federal Reserve from issuing a CBDC without explicit Congressional authorization.
The Anti-CBDC Surveillance State Act and Trump's executive order aim to codify these concerns and prevent future administrations from developing and deploying a CBDC that could potentially be used for surveillance.
Privacy concerns related to CBDCs
One of the main privacy concerns revolves around the fact that unlike physical cash, which offers anonymity, CBDCs would likely leave a digital record of all transactions.
This digital record could potentially allow governments to track every transaction in real-time, raising concerns about government overreach and the erosion of personal freedom.
Some worry about the potential for "programmable money," where a CBDC could be designed to restrict certain types of transactions or have features that could be used for social control, such as preventing purchases of specific items.
Concerns have also been raised about the security of a centralized CBDC system, as a single database containing extensive financial data could be a target for cyberattacks and potential misuse by administrators.
There's also a debate about whether a CBDC could lead to the government having a direct line to every person's financial activity, potentially closing the gap between government surveillance and individual privacy that currently exists with the use of third-party financial institutions.
Potential privacy-preserving measures
Despite these concerns, proponents of CBDCs argue that privacy protections can be built into their design through the use of encryption, anonymization protocols, and strict legal frameworks.
Some central banks are exploring various technical solutions like zero-knowledge proofs and privacy architecture to ensure a "need-to-know" basis for accessing transaction data.
The debate on CBDCs highlights the need to balance the potential benefits of a digital currency, such as faster payments and greater financial inclusion, with the importance of safeguarding individual privacy and preventing the potential for government surveillance.
1. Die unterschätzte Macht von Stablecoins. Frankfurter Allgemeine Zeitung; Frankfurt. 24 July 2025: 25. Von Martin Hock, Frankfurt
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