The history of central banking traces back to the 17th century, beginning with the establishment of the Bank of Amsterdam in 1609 — an institution many consider the first fully fledged central bank in the modern sense. It was followed in 1668 by Sweden's Sveriges Riksbank, officially recognized as the world's oldest functioning central bank. By the end of the 17th century, another pivotal institution emerged: the Bank of England, founded in 1694 and later becoming a model for future central banks. Throughout the 18th and 19th centuries, this institutional architecture spread across Europe: Banque de France was established in 1800, and national banks appeared in Austria, Prussia, Russia, and other states during the 19th century. In the 20th century, the global system expanded with the creation of the U.S. Federal Reserve in 1913, which would become a central pillar of the modern monetary order.
This article aims to provide an in-depth analysis of the reserve portfolios of central banks around the world and to examine how these reserves were formed, how they evolved, and where they are headed in an era of emerging digital assets.
Global Reserve Currency Breakdown (Q1 2024)
Inflationary Currencies: The Foundation of Central Bank Balance Sheets
The earliest prototypes of paper money emerged in China as far back as the 7th–11th centuries, when merchants and the state used paper promissory notes as a substitute for heavy metal coins. However, the true era of fiat currencies began only in the 20th century and was solidified after the 1944 Bretton Woods Conference, when the U.S. dollar became the world's reserve currency and most countries pegged their exchange rates to it. A critical turning point came on August 15, 1971: Nixon "closed the gold window," ending the convertibility of dollars into gold and effectively transforming the system into a global world of pure fiat and floating exchange rates. Fiat currencies gave governments and central banks unprecedented flexibility — the ability to manage interest rates, regulate credit, smooth out crises, sustain economic growth, and finance infrastructure.
But the fiat system also carries fundamental vulnerabilities. After the collapse of the gold standard in 1971, the global money supply expanded by tens of times, and the U.S. dollar lost more than 85% of its purchasing power. Governments gained the ability to expand the money supply with almost no constraints — a process which, as Keynes warned, turns inflation into "a hidden form of wealth confiscation."
Fiat currencies are also used as political instruments: currency sanctions, interest-rate manipulation, abrupt shifts in money supply — all of this creates instability that is ultimately paid for by the end users of money.
As a result, fiat remains a convenient tool for governments, but for ordinary people it often means a slow and systemic erosion of their savings.
The root and source of all monetary evil is the government's monopoly on money.
— Friedrich Hayek, Economist
Purchasing Power of the U.S. Dollar, 1910–2025
Pre-Default Sovereign Bonds: The Core Asset of Every Central Bank
The history of the sovereign bond market dates back to the 17th century, when the founding of the Bank of England in 1694 was accompanied by a major loan to the British government — effectively laying the foundation for the modern mechanism of state financing through debt securities. In the 20th century, with the rise of central banks and the expansion of international capital markets, government bonds became a global anchor of the financial system: they provide liquidity, shape the risk-free rate, and allow trillions of dollars to be accumulated in instruments that can be easily bought and sold. Today, the sovereign debt market is a vast system worth over $100 trillion, serving as a dependable pillar for central banks.
But government bonds also carry serious vulnerabilities that have become increasingly apparent in recent decades. They depend directly on the fiscal health of the issuer, and once global sovereign debt surpassed $300 trillion, bond markets could no longer be viewed as purely safe assets.
When government debt grows too quickly, central banks are forced to keep interest rates artificially low — a policy that erodes bond value, accelerates inflation, and ultimately inflicts losses on both the state and ordinary citizens.
As a result, an instrument designed to be safe turns into a source of systemic risk, with the consequences of its imbalances shifted onto the broader economy and the population.
There is no means of avoiding the final collapse of a boom brought about by credit expansion.
— Ludwig von Mises, economist and philosopher
Gold vs. U.S. Treasuries in Foreign Central Bank Reserves (1970–2025)
Gold: A Relic of the Past on Central Bank Balance Sheets
Gold occupies a unique place in the architecture of global reserves: it is the only asset that has accompanied humanity through every financial era — from the coin-based economies of ancient civilizations to the modern fiat system. It formed the core of the classical gold standard and later of the Bretton Woods system, where it determined the value of the dollar and, through it, the structure of the entire global monetary order.
Gold does not depend on an issuer, cannot be devalued by political decision, survives wars, defaults, regime changes, and remains the final layer of trust between nations. This is why dozens of central banks continue to accumulate it — as insurance against systemic risks and external pressure.
But despite its historical merits, gold remains an asset with significant structural limitations. It generates no yield, produces no cash flow, and does not contribute to economic development. Storing it requires infrastructure, logistics, and security, while the repatriation of gold reserves from foreign vaults often becomes a politically sensitive process. Keynes called the gold standard "a barbarous relic," emphasizing that tying an economy blindly to a metal restricts the flexibility of monetary policy.
In an environment of accelerating global debt, gold is losing its status as a universal reserve anchor and remains only a protective layer — important, but clearly insufficient for the needs and realities of the 21st century.
If you gathered all the gold in the world into a single cube, you could sit on it, admire it, but it would produce nothing, create no jobs, and generate no income. A hundred years from now, you would still have the same metal cube.
— Warren Buffett
Global Central Bank Gold Reserves by Country (2024)
Equities: Risky Assets as the New Trend — But Is There Risk?
Over the past two decades, some central banks have gradually begun to move beyond the traditional set of reserve assets and include equities from developed markets in their portfolios.
Switzerland has gone the furthest: its national bank holds around 20% of its foreign reserves in equities, amounting to roughly $150–180 billion — the largest equity portfolio of any central bank in the world.
The Bank of Japan owns a massive portfolio of ETFs tracking the Japanese market: through these funds it effectively holds around 7–10% of Japan's entire equity market, with the market value of its holdings exceeding $400–500 billion, making it the country's largest institutional shareholder.
The Bank of Israel allocates roughly 15–17% of its reserves to equities (about $35–50 billion), while the Czech National Bank invests around 10–12% into global indices through managers such as BlackRock and State Street.
Today, it's increasingly difficult to say which carries more risk: equities, which have historically trended upward, or government bonds issued by countries whose debt levels have long exceeded sustainable thresholds.
In the current environment, around 20% of our foreign currency reserves are invested in equities… Equities play an important role because they generally offer higher return potential than government bonds issued by major advanced economies.
— Fritz Zurbrügg, former vice chairman of the Governing Board of the Swiss National Bank (SNB).
Growth of $100 Across Asset Classes (1970–2023)
Cryptocurrencies: An Emerging Trend
Central banks' interest in cryptoassets is only beginning to take shape: the industry is barely 15 years old and still far too small to compete structurally with traditional reserve assets. The total cryptocurrency market cap fluctuates around $3 trillion — negligible compared to the global sovereign debt market ($100+ trillion) or the volume of official central bank reserves ($12–13 trillion).
Yet governments already collectively hold more than 500,000 BTC (through seizures, treasuries, and strategic purchases). In parallel, initiatives to create national crypto reserves are emerging in countries such as Switzerland, the Czech Republic, and the United States, while major analytical institutions forecast that by the end of the decade some central banks may begin testing small crypto allocations — 0.1–1% of their portfolios — within experimental baskets.
The trend is still weak, but clearly emerging: the industry is growing, institutionalization is accelerating, and the transition of crypto from an "exotic outlier" to a real layer of reserves is ultimately a question of time and market maturity.
The root problem with conventional currency is all the trust that's required to make it work.
— Satoshi Nakamoto
DeflationCoin: The Ideal 21st-Century Asset for Integration into Central Bank Reserves
In DeflationCoin, the vulnerabilities of the above asset classes are fundamentally resolved:
DeflationCoin is built on a deflationary principle — unlike all fiat currencies, which are inherently inflationary. While inflation erodes the value of money, deflation strengthens it over time.
Government bonds suffer from structural flaws: extremely low yields, high default risk driven by massive debt levels, and systemic inflationary pressure. DeflationCoin stands in direct contrast to the fiat-credit system: its value naturally strengthens as the network grows, it has no creditors, and its monetary model is based on built-in algorithmic deflation.
Gold faces structural limitations as an asset: it has no internal economy capable of generating income, and its storage and logistics remain burdensome. DeflationCoin builds its own digital economy, creating intrinsic sources of value and yield — while offering far more practical storage and transferability.
Today, Bitcoin is considered the primary candidate from the crypto industry for central bank reserves. Yet it also has significant drawbacks: no deflation, no internal economy, no utility, and an energy-intensive mining system that creates no economic value and harms the environment. DeflationCoin naturally eliminates all of these issues.
Taken together, all of this makes one conclusion clear: DeflationCoin is the ideal 21st-century asset for integration into central bank reserves worldwide.
Defman and the U.S. Federal Reserve System