Ray Dalio Says Central Banks Won't Adopt Bitcoin as Tech Advancements Could Break BTC Code in the Future

Billionaire investor Ray Dalio founded Bridgewater Associates, which is one of the most successful hedge funds in the US.

In a recent post on the social media platform X, Dalio made a prediction about central banks' adoption of Bitcoin, which recently surged to an all-time high of over $125,000 (£93,051).

He opined that central banks are unlikely to adopt Bitcoin, citing a lack of privacy and the potential for the cryptocurrency's code to be compromised in the future.

'I can't say exactly how effective Bitcoin is as a money, but it's being perceived by many as an alternative money and so is worth paying attention to. Money needs to be both a medium of exchange and a storehold of wealth — and the latter is more important,' he wrote. 'I doubt that any central bank will take it on as a reserve currency. That's because all of the transactions are public, so there's no privacy to it, and there's a risk that in the future the code could be broken to make it less effective through government controls.'

However, he disclosed owning some Bitcoin in his portfolio.

Many experts believe that advancements in quantum computers could pose a threat to Bitcoin due to their theoretical ability to break the cryptographic algorithms that protect blockchains. Even in the iShares Bitcoin Trust ETF prospectus, BlackRock mentioned quantum computing under its 'risk factors' section.

Although quantum computers have yet to demonstrate the ability to threaten Bitcoin, BlackRock says they could render the flagship cryptocurrency 'flawed and ineffective.'

In the prospectus, BlackRock highlighted that flaws in the source code for digital assets have been exploited in the past, which disabled some functionality for user or exposed their personal data, and at times led to the theft of crypto asset holdings.

The asset manager added that the cryptography underlying Bitcoin could prove to be flawed. It explained that developments in mathematics and technology, including breakthroughs in digital computing and quantum computing, could render such cryptography ineffective.

In any of these cases, a threat actor could compromise the security of the Bitcoin network or take the Trust's Bitcoin, which would severely impact the value of the shares, according to BlackRock.

Furthermore, any negative impact on the Bitcoin network's functionality could lower its appeal to users and ultimately dampen demand for the flagship cryptocurrency.

'Even if another digital asset other than bitcoin were affected by similar circumstances, any reduction in confidence in the source code or cryptography underlying digital assets generally could negatively affect the demand for digital assets,' BlackRock stated.

A recent US Federal Reserve study, titled 'Harvest Now, Decrypto Later,' also cautioned that quantum computers could one day decrypt Bitcoin's historical transactions, exposing private data recorded using current encryption standards. The study indicated that adversaries could collect encrypted blockchain data today and decrypt it once quantum computers become more advanced in the future.

Although post-quantum cryptography could safeguard future transactions on the blockchain, there is currently no existing method that can retroactively protect data already stored on public distributed ledgers.

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