The possibility of the United States establishing a BTC strategic reserve was proposed by Trump last summer, sparking endless imagination within the cryptocurrency market. Especially now, with Trump officially taking office, market predictions suggest there’s more than a 50% chance that this will come to fruition within the first 100 days of his presidency (Polymarket betting data). Moreover, Trump launched his own personal memecoin, “Official Trump (btw, bingx is the first CEX which listed this token),” before taking office, and his wife later released the “Melania Meme.” This has led people to harbor greater expectations that Trump will implement more favorable cryptocurrency policies after assuming office.
Despite many skeptics questioning the stability and security of BTC, supporters argue that BTC reserves could strengthen the US dollar and help combat inflation. Currently, there are differing opinions on whether Trump can use executive power to create the reserve fund and direct the Treasury Department to spend money, or if a Congressional bill is necessary.
What is a strategic reserve?
A strategic reserve is a stockpile of critical resources, set aside for emergencies, sudden events, or wartime situations, allowing the country to mobilize and utilize these reserves quickly. The most well-known example is the US Strategic Petroleum Reserve, the largest national oil reserve in the world (700 million barrels), created by Congressional legislation in 1975 to address the economic impact of the 1973–1974 Arab oil embargo. The US has used this reserve during wartime, or when Gulf Coast oil infrastructure was impacted by hurricanes, as well as during the Ukraine war. The US also maintains strategic reserves of gold, minerals, food, military supplies, and more.
How would a US BTC strategic reserve work?
Experts have differing opinions on whether Trump could create a BTC strategic reserve using executive power.
  • Initial Source
The initial source of the reserve would likely be BTC seized from criminals by the US government, which currently holds about 200,000 BTC, valued at approximately $21 billion at current prices. Trump suggested in his July speech that these BTC could be the starting point for the reserve, but it’s unclear how they would be transferred from the Department of Justice. Trump has not clearly stated whether the government would buy more BTC on the open market to increase the reserve.
  • Funding Source 1: ESF
Some believe Trump could use an executive order to access the US Treasury’s Exchange Stabilization Fund (ESF) to create the reserve. This fund is used for the purchase or sale of foreign currencies and could potentially be used to hold BTC. This option is practical, quick to execute, and doesn’t require individual approval from Congress for use within certain limits, offering significant flexibility. The fund currently has over $200 billion and is primarily used to stabilize the US dollar and support international monetary flows.
  • Funding Source 2: Issuing New Debt
Another view suggests the government could issue new debt to purchase BTC, though this seems unlikely. US government debt issuance requires Congressional approval, and with frequent debt ceiling debates, it’s unlikely both parties would agree to increase debt for BTC purchases, especially with more pressing expenditure priorities such as pensions, healthcare, and military needs. However, historically, the US has used treasury bonds to finance gold purchases for its reserves, leaving a small window of possibility.
  • Funding Source 3: Selling Gold
Some BTC reserve supporters imagine the US could sell part of its gold reserves and use the proceeds to buy BTC. The main issue here is that selling gold could cause extreme volatility in the global gold market, potentially destabilizing reserves of all nations and triggering instability in international financial markets, as gold serves as collateral for many financial institutions. Furthermore, gold prices are relatively stable and recognized as a scarce international asset with excellent liquidity, making it unlikely the US would exchange gold for BTC. It would be more ideal for both assets to grow as reserves rather than one replacing the other.
  • Potential Purchase Scale: 1 Million BTC
The most specific BTC reserve proposal circulating in Washington comes from cryptocurrency-supporting Republican Senator Cynthia Lummis, who holds 5 BTC. In July, she introduced a bill that would create a reserve operated by the Treasury Department. The proposal envisions the Treasury creating a program to purchase 200,000 BTC annually over five years until the reserve reaches 1 million BTC, approximately 5% of the global BTC supply (around 21 million). The Treasury would fund these purchases using profits from Federal Reserve deposits and gold holdings. The BTC reserve would be maintained for at least 20 years. Lummis’ proposal has yet to gain attention in Congress, and its likelihood of being implemented remains uncertain.
  • Perhaps Starting at the State Level
Another possibility is that the reserve could be established in phases, potentially beginning with one state (possibly Pennsylvania or Texas, as six states in the US have already proposed plans to establish BTC strategic reserves). State governments could act more flexibly and independently, viewing BTC as a tool to hedge against fiscal uncertainty or attract crypto investment and innovation, before gradually moving to the federal level. For instance, in November, Pennsylvania introduced the “Pennsylvania BTC Strategic Reserve Act,” which would authorize the state Treasury to invest 10% of its $7 billion reserve in BTC. A month later, Texas introduced a similar bill, the “Texas Strategic BTC Reserve Act,” proposing the establishment of a special fund in the state Treasury to hold BTC as a financial asset for at least five years.
  • What is WLFI plotting?
Lastly, the WLFI (WORLD LIBERTY FINANCIAL) project, controlled by the Trump family, has recently used funds to purchase over $50 million in cryptocurrency, including LINK, AAVE, BTC, ETH, ENA, and TRX. It’s possible they will continue purchasing tens of millions more, and the relationship between this project and the potential US strategic reserve remains uncertain.
What are the benefits of a BTC reserve?
Since this proposal is being promoted, there must be a logically consistent argument. Trump’s view is that a BTC reserve would help the US dominate the global BTC market to counter competition from China. Other supporters argue that by holding BTC reserves (believing BTC will continue to appreciate in the long run), the US could reduce its deficit without raising taxes, thereby strengthening the dollar. Lummis believes her plan could reduce US debt by half over 20 years. “This will help us combat inflation and protect the dollar on the global stage.” Some supporters believe a strong dollar would provide the US with more leverage in its dealings with opponents like China and Russia.
What are the risks of a BTC reserve?
Cryptocurrency skeptics argue that, unlike most commodities, BTC has no practical use or intrinsic value and is not critical to the functioning of the US economy. BTC is only 16 years old and still too young and volatile to assume its value will continue to rise in the long term. Additionally, cryptocurrency wallets are vulnerable to cyberattacks, and they point out that due to BTC’s volatility, any government purchase or sale could significantly impact the BTC price.
Conclusion
Since Trump’s strategic reserve plan clearly faces numerous obstacles, the key issue is where to find additional funds to purchase new reserves. Without addressing this question, the US federal government is unlikely to make new BTC purchases, although we may see state governments act first. More importantly, with Trump’s endorsement and further policy loosening (such as significant bank service deregulation), cryptocurrency’s exposure is increasing, and adoption is bound to rise. Ultimately, the US will likely accept cryptocurrency more broadly.