China Dumps US Debt: Is Bitcoin the Future Shield Against Dedollarization?

The signs keep pointing in that direction.

The geopolitical tug-of-war is intensifying. Despite Donald Trump's threats, China continues to reduce its holdings of US debt, irking the White House and sending ripples through global markets.

A striking sign of this trend? The United Kingdom has just surpassed China as the second-largest holder of US Treasury bonds, with $779 billion.

This isn't due to a trade surplus, but rather London's position as a global financial hub, acting as an intermediary for multinational corporations, including those from the United States. A similar phenomenon is observed in the Cayman Islands, Luxembourg, Belgium, and Ireland, where dollar reserves are decoupled from their GDP.

Meanwhile, the Middle Kingdom is doing the opposite. After peaking at $1.3 trillion in 2013, China's dollar reserves are steadily declining, shifting towards gold and European bonds. Even though China acquired $23 billion in Treasury bonds in February 2025, it wasn't enough to offset its maturing holdings.

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The Deep Reasons Behind the Disengagement

This gradual withdrawal by China is no trivial matter. It reflects growing geopolitical tensions and major concerns about the US fiscal situation. The numbers are telling: $5.2 trillion in tax revenues projected for 2025, with expenditures exceeding $7 trillion. Pressure is mounting on the Fed chairman, and the shadow of new “Quantitative Easing” looms, an easy fix that raises concerns.

Furthermore, the freezing of 300 billion euros of Russian reserves by the European Union served as a lesson for Beijing. How long before the United States applies a similar measure to China? This fear is not unfounded. It's partly to deter the BRICS from dedollarizing too quickly that the United States is increasing tariffs and fanning the flames of war in Ukraine.

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The Decline of the Dollar's "Exorbitant Privilege"

The graph below, though not included here, would show that foreign investors now hold only 31% of US debt, compared to nearly 60% in 2008, just before the subprime crisis and the start of Quantitative Easing. A paradigm shift is underway.

The frustration of emerging countries is palpable. Recently, Brazilian President Lula da Silva challenged Donald Trump on tariffs, stating: “No gringo will give orders to this president.” He continued with a forceful declaration:

“We've had enough of being subordinate to the North. We are discussing the possibility of creating our own currency, or perhaps using our national currencies to trade among ourselves, without depending on the dollar. I don't have to buy dollars to trade with countries like Venezuela, Bolivia, Chile, Sweden, the European Union, or China. We can use our own currencies. Why should I be tied to the dollar, a currency I don't control? It's the United States that prints dollars, not us.”

What an atmosphere ...

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Gold, Local Currencies ... and Bitcoin?

The BRICS often talk about a new currency, but its realization remains uncertain. Replicating the European model would be risky for such diverse economies and cultures. Russia, for instance, stopped accepting Indian rupees for its oil, as India doesn't produce enough goods needed by Russia.

It's partly because of these challenges that central banks have been accumulating gold en masse in recent years. The yellow metal remains a universal safe haven for storing long-term value.

But gold doesn't facilitate fluid exchanges. This is where Bitcoin could be a game-changer. Its potential for integration into financial markets (like SPIMEX) is real, especially as transaction fees have decreased with increased volumes. While Bitcoin is volatile, solutions like the Lightning Network and stablecoins can manage this short-term exchange risk.

Stateless, unfreezable, and with an absolutely limited supply, Bitcoin seems poised to become a top-tier international currency. That's why the United States is seeking to accumulate as much of it as possible. Donald Trump knows that the country will sooner or later have to relinquish the dollar's “exorbitant privilege” to reduce its trade deficit. The stakes are high: to hedge against a currency that would allow the world to trade on equal terms.

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What if the United States were to sheathe its sword once it had accumulated enough Bitcoin to cushion dedollarization? Only time will tell, but the hypothesis is fascinating.

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