Bitcoin Forces Global Policy Trilemma on Central Banks

“Bitcoin has effectively cornered the world’s central banks, and there is no way out,” said author Adam Livingston on July 9.

He added that the banks face an “unprecedented challenge,” in that they cannot print Bitcoin to defend their currency, which creates a “policy trilemma.”

Policymakers essentially have three choices: they can raise interest rates to defend the currency through higher yields, deplete foreign currency reserves to support the domestic currency, or they can “join the migration,” and purchase Bitcoin themselves, “legitimizing the very trend they’re trying to counter,” according to Livingston.

“This represents a fundamental shift in the balance of power between Bitcoin and governments. The free market is going to win.”

Bitcoin has effectively cornered the world’s central banks and there is no way out.

The banks face an unprecedented challenge: they cannot print Bitcoin to defend their currency.

This creates a policy trilemma where authorities must choose between:

Raise Interest Rates:…

— Adam Livingston (@AdamBLiv) July 9, 2025

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.