The concept of a U.S. government currency reserve, proposed by U.S. Senator Loomis and supported by former President Donald Trump, has been widely praised by Bitcoin investors, but the specific implementation details remain unclear.
A strategic Bitcoin reserve for the United States has been included in presidential candidate Donald Trump’s campaign promises, and Senator Cynthia Lummis is currently drafting legislation to make this a reality.
So far, the effort has been short on specifics and its chances of passing Congress in the short term are limited.
Former President Donald Trump, current U.S. senators and prominent figures in the Bitcoin (BTC) investment community have generally agreed that the United States should begin building a reserve of the most famous cryptocurrency, though specific details are scarce and the idea is unlikely to be implemented anytime soon.
At the 2024 Bitcoin Conference, Trump did not disclose detailed information about the storage of Bitcoin, only saying that the United States should retain all existing and future acquired Bitcoin as a reserve.
“For too long, our government has violated a fundamental principle that every Bitcoin enthusiast has taken to heart: Never sell your Bitcoin,” Trump told an audience of enthusiastic Bitcoin enthusiasts on Saturday. He announced that his second-term policy would be to make existing government holdings of Bitcoin the core of the country’s strategic Bitcoin reserve, a move that would “transform great wealth into a permanent national asset for the benefit of all Americans.”
Senator Cynthia Loomis announced at the conference that the bill she is drafting will retain the more than 200,000 bitcoins currently held by the United States and continue to increase the number of bitcoins by converting excess reserves in the Federal Reserve system until the United States accumulates 1 million bitcoins (about 5% of the supply).
“This is our Louisiana Purchase moment,” Loomis told a cheering crowd at the Bitcoin 2024 event, referring to the deal that added a swath of territory to the post-colonial United States. “Thank you, Bitcoin.”
Currently, the majority of bitcoins held by the U.S. government come from individuals or entities associated with criminal activity. Nearly half of them, about 95,000, come from two individuals accused of money laundering after the cryptocurrency exchange Bitfinex was hacked.
While Loomis said the proposed reserve would be used to reduce or even eliminate the U.S. national debt, she did not say exactly how the money would be used, beyond the basic assumption that more government wealth generally means less debt. Her office has yet to share more information as it is still preparing the bill and seeking support from other senators. Her spokesman did not respond to multiple requests for comment.
As the industry tries to comprehend this concept, U.S. authorities on Monday moved a large portion of the government’s bitcoin holdings, worth about $2 billion, in a move tied to the Silk Road seizure. It’s unclear where the assets are going or whether this signals an imminent sale. The government’s bitcoin supply comes from criminal cases and is liquidated by the U.S. Marshals Service, though that has proven challenging.
For various reasons in the history of the United States, strategic reserves of a variety of important materials such as gold, oil, grain, and helium have been established.
“Establishing Bitcoin as a strategic reserve also requires further work, including determining how much Bitcoin should be held as a reserve, the basis for determining this threshold, how Bitcoin should be acquired and stored, when and under what circumstances it should be used, which agency is responsible, and the timeline for implementation,” Rahul Mewawalla, CEO of bitcoin mining company Mawson Infrastructure Group, said in an emailed statement. He stressed that answering these questions “may be challenging” and suggested that establishing a committee of industry players could be helpful.
A far-reaching and potentially controversial bill like Lummis envisions would have little chance of making any headway in the current Congress, which ends in January. Crypto legislation has yet to gain enough support in the Democratic-led Senate to bring any existing bills to a vote, and the November 2024 elections are expected to turn policy issues into the focus of political debate. If Lummis, a Republican, wins a majority in the next Congress, his bill could make more headway in session. Still, Senate legislative measures typically require bipartisan support to advance.
In recent years, Lummis has signed on to several pro-crypto initiatives aimed at comprehensively establishing U.S. regulation and rules for digital assets, though those initiatives have yet to actually be put into action.
So far, however, the idea has won over a host of influential supporters.
Michael Saylor, executive chairman of software company MicroStrategy (MSTR) and the largest holder of Bitcoin, believes that the United States should aim even higher. He proposed that the United States should buy 4 million Bitcoins to strengthen its national finances. He believes that one or two leading countries will seize such an opportunity.
“Bitcoin is not a silver bullet, it’s not going to solve all of our problems,” Thaler said, “but it certainly solves some of our problems.”
Cathie Wood, CEO of ARK Invest, also expressed support for the reserve strategy.
“If it’s done right, it’s not just a monetary policy tool, it’s something that’s on our balance sheet... It could be transformative,” she said.
Also at Friday's event, Robert F. Kennedy, who is running for president as an independent, strongly supported the idea of a reserve.
Even if that doesn’t happen yet, the idea alone could benefit the bitcoin ecosystem, said Pedro Lapenta, head of research at Hashdex.
“While it is unclear if or when the U.S. will hold Bitcoin as a strategic reserve asset, the idea has become a permanent part of public policy thinking for governments around the world,” LaPenta said in an emailed statement. “This marks an important step forward that will force many governments and large institutions to carefully consider the benefits of holding Bitcoin.”
