What Would a U.S. Bitcoin Strategic Reserve Look Like

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President Donald Trump established a digital asset working group on Thursday to explore the creation of a U.S. cryptocurrency stockpile, which could potentially be made up of cryptocurrencies seized by the federal government.

The group is tasked with delivering a report by July that outlines the criteria for such a stockpile. While some in the crypto market were hoping for an immediate creation of a Bitcoin strategic reserve, the president’s order did not authorize that. Instead, the working group is tasked with evaluating the legal processes and potential methods for using confiscated cryptocurrencies, estimated at around 200,000 tokens worth approximately $21 billion.

The concept of a "strategic reserve" refers to a critical stockpile of resources that can be tapped in times of crisis or supply disruptions. A well-known example is the U.S. Strategic Petroleum Reserve, which was established after the 1973-74 oil embargo to help stabilize oil markets during emergencies. Other countries have strategic reserves of commodities like metals, grains, and even maple syrup.

For a U.S. strategic Bitcoin reserve, details remain unclear. The working group will assess whether Bitcoin seized through law enforcement could form part of the reserve. It is uncertain whether the government will purchase additional Bitcoin from the market, as the order doesn’t provide specific guidance.

A more detailed proposal for a Bitcoin reserve comes from Senator Cynthia Lummis, who has introduced a bill that would create a reserve managed by the Treasury. Under her plan, the Treasury would purchase 200,000 Bitcoin annually for five years until it holds one million Bitcoin, or about 5% of the global supply. The funding would come from Federal Reserve bank profits and gold holdings.

Proponents of a Bitcoin reserve argue that it could help the U.S. dominate the global Bitcoin market, reduce its deficit without raising taxes, and strengthen the U.S. dollar, potentially providing more leverage over countries like China and Russia. Lummis believes her plan could cut the U.S. national debt in half over 20 years.

However, critics of the idea point out that Bitcoin lacks intrinsic use, making its value highly speculative and volatile. They also caution that storing Bitcoin could make the government vulnerable to cyberattacks and that government purchases or sales could significantly affect Bitcoin’s price due to its volatility.

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