As the dust settles on a contentious US presidential election, one intriguing promise from President-elect Donald Trump is garnering particular attention in the crypto community: the prospect of a strategic Bitcoin reserve. With the US government currently holding over 208,000 Bitcoin (worth around $19 billion), the administration’s approach to managing this digital asset trove could have significant implications.
The Path to a Bitcoin Reserve
The idea of a national Bitcoin reserve gained prominence in July when then-candidate Trump pledged to cease the historical practice of auctioning off Bitcoin seized by the government. Instead, he declared that under his watch, 100% of confiscated Bitcoin would be retained.
While this might seem like a straightforward policy shift, experts point out that the actual implementation could be complex, likely requiring coordination between multiple federal agencies. Perianne Boring, CEO of the Chamber of Digital Commerce, highlighted the ambiguity:
We don’t have anything in writing, do we? We’re just going off of a fairly generic speech. Can you just move money between federal agencies like that? I don’t know.
Perianne Boring, CEO of the Chamber of Digital Commerce
The process, Boring suggested, might necessitate Congressional action, especially if it involves transferring the Bitcoin from the Justice Department to the Treasury in a way that resembles a strategic reserve fund.
Navigating the Legislative Landscape
The specifics could vary depending on the seizing agency and the circumstances of the seizure, according to Moish Peltz, a partner at Falcon, Rappaport & Berkman. Some of the Bitcoin might require Congressional legislation to repurpose, while others may not.
However, Peltz noted that the government’s current experience with holding large quantities of Bitcoin demonstrates its competency and allows one to easily envision, from a technical standpoint, a relatively low degree of difficulty in establishing a strategic reserve. Over time, this could evolve into a more significant position as regulatory clarity improves, legislation is enacted, and the government develops a more comprehensive digital asset strategy.
Exploring Proactive Acquisition
Beyond simply retaining seized Bitcoin, some are advocating for a more ambitious approach. Senator Cynthia Lummis introduced a new bill proposing that the US sell a portion of its gold reserves to buy 1 million Bitcoin. At current prices, this would require a minimum $90 billion investment.
While Boring expressed optimism about the bill’s prospects, given the impending Republican control of both houses of Congress and the White House, Castle Island Ventures partner Nic Carter was more skeptical. After meetings with Congressional members and Federal Reserve officials, Carter reported that a strategic reserve “didn’t come up in any of the conversations I had.” Lawmakers, he suggested, are more focused on stablecoin legislation and investigating Operation Choke Point 2.0.
Unconventional Acquisition Strategies
There may be an untested legal loophole that allows the government to acquire Bitcoin without Congressional approval, according to Zack Shapiro of the Bitcoin Policy Institute. He argues that the Treasury could potentially use the Exchange Stabilization Fund (ESF) to buy Bitcoin-denominated debt securities, with the Bitcoin being transferred to the Treasury upon maturity.
This mechanism would allow the Treasury to acquire Bitcoin without directly purchasing it on the open market, thus avoiding potential market disruptions or price spikes that could result from large direct purchases.
Zack Shapiro, Bitcoin Policy Institute
As the Trump administration prepares to take office, the crypto world will be watching closely to see how it navigates the complexities of establishing a Bitcoin reserve. Though the path may not be straightforward, the very existence of this conversation marks a significant milestone in Bitcoin’s journey from the fringes of the financial system to the halls of national treasury departments.
