The Rise of Digital Assets: Bitcoin May Challenge the Dollar's Status as the Global Reserve Currency

On March 31, Larry Fink, the CEO of a renowned asset management company, released a 27-page annual letter to investors. In this letter, Fink unusually warned that if the United States fails to control its ever-expanding debt and fiscal deficit, the dollar's position as the global reserve currency for decades could ultimately give way to emerging digital assets like Bitcoin.

Bitcoin May Affect the Status of the US Dollar as a Reserve Currency

Fink raised a thought-provoking question in the report: "Will Bitcoin undermine the dollar's reserve currency status?"

He pointed out that the United States has long benefited from the position of the dollar as the global reserve currency. However, this advantage is not a permanent guarantee. Since 1989, the growth rate of U.S. debt has been three times that of GDP. This year, interest payments alone will exceed $952 billion, surpassing defense spending. By 2030, mandatory government spending and debt service will consume all federal revenue, creating a long-term deficit.

While warning of the risks of traditional finance, Fink also made it clear that he does not oppose the development of digital assets. He wrote: "It needs to be made clear that I am clearly not opposed to digital assets. But two things can coexist: decentralized finance is an extraordinary innovation. It makes markets faster, cheaper, and more transparent. However, it is this innovation that could also undermine the economic advantage of the United States—if investors begin to believe that Bitcoin is safer than the dollar."

Reflecting on performance, Fink mentioned that their Bitcoin ETF launched in the United States became the largest exchange-traded product debut in history, surpassing $50 billion in assets under management in less than a year. It ranks as the third most attractive product in the entire ETF industry, only behind the S&P 500 index fund. More than half of the demand comes from retail investors, with three-quarters coming from investors who have never held the company's products before. This year, they have expanded their Bitcoin products to exchange-traded products (ETPs) in Canada and Europe.

Fink also pointed out that ETFs have not only achieved great success in the United States but are also becoming a key tool in driving the development of investment culture in Europe. Currently, only one-third of individual investors in Europe participate in capital market investments, a figure that is far below the over 60% in the United States. To increase this ratio, they are collaborating with several established institutions and emerging platforms in Europe to jointly lower investment barriers and enhance local financial literacy.

Optimistic about RWA, believing that tokenization is the "highway" of the future of finance.

From ETFs to the currently popular cryptocurrency technology, Fink believes that tokenization is becoming a key force in reshaping financial infrastructure.

He wrote that the circulation of global funds today still relies on the "financial pipeline" established in the era when trading floors depended on vocal bids and fax machines were considered revolutionary tools. Take the Society for Worldwide Interbank Financial Telecommunication (SWIFT) as an example—it supports global transactions worth trillions of dollars every day, and its operation resembles a relay race: banks pass instructions in sequence, carefully checking details at each step. In the 1970s, when the market was smaller and trading frequency was lower, this relay method was reasonable. But today, continuing to rely on SWIFT is as inefficient as sending an email to the post office for forwarding.

According to Fink, the emergence of tokenization will fundamentally change this inefficiency. If SWIFT is the postal service, then tokenization is the email itself – assets can flow directly and in real-time, bypassing all intermediaries.

Fink further illustrated how tokenization profoundly transforms the financial ecosystem, undoubtedly optimistic about the RWA market. "It is the conversion of real-world assets (such as stocks, bonds, real estate) into digital tokens that can be traded online. Each token represents your ownership of a specific asset, like a digitized title deed. Unlike traditional paper certificates, these tokens are securely stored on the blockchain, making buying, selling, and transferring instantaneous, without the cumbersome paperwork and waiting times. Every stock, every bond, every fund—every type of asset can be tokenized. Once realized, it will completely revolutionize the way of investing. The market will no longer require a closing, and transactions that used to take days to complete can be settled in seconds. The hundreds of billions of dollars currently frozen due to settlement delays will be able to be immediately reinjected into the economy, driving further growth."

He stated that perhaps most importantly, tokenization will make investment more "democratized". Tokenization can achieve democratization of access. Tokenization allows for fractional ownership of assets - assets can be divided into countless small pieces. This means that assets which were previously high-threshold (such as private real estate, private equity) will be open to a wider group of investors, significantly lowering the barriers to participation.

Tokenization can also democratize shareholder voting. Owning shares means you have the right to vote on shareholder proposals. Tokenization makes voting more convenient, as your ownership and voting rights are recorded digitally, allowing you to participate in voting securely and without barriers from anywhere.

Tokenization can also achieve the democratization of returns. Some investments offer returns that far exceed others, but often only large investors can participate. One reason for this is the "friction" caused by legal, operational, and bureaucratic barriers. Tokenization can remove these barriers and provide more people with the opportunity to access high-yield areas.

However, Fink also candidly pointed out that the popularization of tokenization still faces a key technical and regulatory challenge. "One day in the future, I believe tokenized funds will become a daily allocation for investors just like ETFs—provided that we tackle a key issue: identity verification."

He stated that financial transactions require strict identity authentication. Currently, commonly used payment methods and trading platforms can achieve this when buying and selling securities. However, tokenized assets will no longer go through these traditional channels, so we need a completely new digital identity verification system.

"It sounds complicated, but the country with the largest population in the world—India, has achieved this goal. Today, over 90% of Indians can securely complete transaction verification through their smartphones."

In this annual letter, Fink also reviewed the historical development of the capital markets, pointing out their important role in promoting social prosperity and helping individuals accumulate wealth through investments. He mentioned that further financial innovation is still needed to bridge the gap between public and private markets, and emphasized the importance of expanding investment opportunities, particularly allowing small and medium investors to participate in asset classes that were previously only open to the wealthiest individuals.

Although he also acknowledged the current widespread economic anxiety, Fink still tried to reassure investors, stating that such times are not new—just as in historical cases, relying on human resilience and the power of capital markets, the economy will eventually stabilize.

Overall, this annual letter to investors warns of the risks to the dollar's global reserve status and serves as a forecast about the future of finance. From the tokenization reconstructing capital markets to the breakthroughs needed in digital identity systems, Fink reveals the irrationalities of the existing system and points out the new directions that technological and institutional innovations may bring.