As the dust settles on the 2024 US presidential election, the crypto world is abuzz with speculation about the future of the government’s substantial Bitcoin holdings. President-elect Donald Trump’s campaign promise to halt the sale of seized Bitcoin and establish a strategic reserve has sparked both enthusiasm and skepticism among experts and policymakers. With over 208,000 Bitcoin worth more than $19 billion in government coffers, the question remains: Can the US move forward with a strategic Bitcoin reserve without Congressional approval?
Navigating the Legal Landscape
The path to a government-held strategic Bitcoin reserve is fraught with legal and logistical challenges. While Trump’s campaign rhetoric was clear in its intent, the reality of implementing such a policy is far more complex. According to Perianne Boring, founder and CEO of the Digital Chamber, a crypto advocacy group, the process would likely require coordination among multiple government agencies, including the Department of Justice, US Marshals Service, and US Treasury.
If you were to move Bitcoin out of the Department of Justice into the Treasury, and it was like a strategic Bitcoin stockpile fund, that would likely require an act of Congress. But again, I’m not sure how much Trump could do within his executive powers.
– Perianne Boring, CEO of the Digital Chamber
Moish Peltz, a partner at Falcon, Rappaport & Berkman, noted that the policies surrounding Bitcoin seizure might vary by department and depend on how the Bitcoin was acquired in the first place. While some seized Bitcoin may necessitate Congressional action, it may not be required in all cases.
A Gradual Process
Experts suggest that the process of establishing a strategic Bitcoin reserve could be gradual, building upon the government’s existing experience in seizing and safeguarding large amounts of Bitcoin. As regulatory clarity improves and comprehensive legislation is enacted, the government may develop a more robust stance on digital assets.
Buying More Bitcoin: A Congressional Hurdle
While retaining seized Bitcoin is one vision for the reserve, some proponents, like Senator Cynthia Lummis, have argued for a more proactive approach. Lummis recently introduced a bill proposing that the US sell a portion of its gold reserves to purchase 1 million Bitcoin – a move that would require a minimum expenditure of $90 billion at current prices.
An executive order could also initiate the process, but large-scale financing typically requires Congressional action to appropriate funds and create a legal framework.
– Moish Peltz, partner at Falcon, Rappaport & Berkman
Boring is optimistic about the bill’s chances, given the impending Republican control of both houses of Congress and the White House. However, Nic Carter, a partner at Castle Island Ventures, is less convinced, suggesting that the strategic reserve may not be a top priority for the new Congress.
A Novel Approach: The Exchange Stabilization Fund
Zack Shapiro, head of policy at the Bitcoin Policy Institute, recently put forth a novel theory: the Treasury could potentially acquire Bitcoin through the Exchange Stabilization Fund (ESF) by purchasing bitcoin-denominated debt instruments. This mechanism would allow the Treasury to obtain Bitcoin without directly buying it on the open market, potentially avoiding market disruptions or price surges that could result from large direct purchases.
The Road Ahead
As the Trump administration prepares to take office, the fate of the government’s Bitcoin holdings remains uncertain. While the idea of a strategic Bitcoin reserve has gained traction in some circles, the legal and logistical hurdles are substantial. As policymakers grapple with the complexities of the crypto landscape, the decisions made in the coming months and years will have far-reaching implications for the future of Bitcoin and digital assets in the United States.
According to betting markets, the odds of the government establishing a Bitcoin reserve between January and April 2025 currently stand at 30%. As the debate continues, one thing is clear: the path to a strategic Bitcoin reserve is anything but straightforward, and navigating the legal and political landscape will require careful consideration and collaboration among policymakers, experts, and advocates alike.
