Historical turning point

Author: 0xCousin, lOBC Capital

On March 6, 2025, US President Trump signed the Executive Order "Establishing a Strategic Bit Coin Reserve and a US Digital Asset Reserve". The next day, the White House Crypto Summit was also held.

This is another important milestone for the crypto industry.

Bit Coin Enters the Halls: New Chess Game of US Strategic Reserves

Let's look at this from the perspective of the US government. The purpose of the US establishing a strategic Bit Coin reserve is to strengthen and consolidate the US's dominant position in the global financial system.

The Executive Order states clearly: "The US government currently holds a large amount of BTC, but has not yet developed policies to leverage the strategic value of these BTC in the global financial system. Just as proper management of the state's ownership and control of other resources is in the national interest, we must utilize rather than restrict the potential of digital assets to promote national prosperity."

The US has precedents for strategic reserves. For example:

Strategic Gold Reserves - In the 19th century, the United States implemented the gold standard, with the value of the US dollar supported by gold reserves. In 1933, President Roosevelt signed Executive Order 6102, prohibiting private ownership of gold and mandating the return of gold to the Federal Reserve; in 1934, the United States introduced the Gold Reserve Act, transferring gold reserves to the Treasury Department; in 1944, the United States passed the Bretton Woods system, promising to exchange gold at $35 per ounce, making the US dollar the international currency. It was not until the Nixon administration in 1971 that the US dollar was decoupled from gold, the Bretton Woods system collapsed, and the gold standard ended.

Strategic Petroleum Reserves - In 1974, the United States reached an agreement with Saudi Arabia and OPEC countries, requiring international oil trade to be conducted in US dollars, making the US dollar the global foreign exchange reserve currency. In 1975, the US Congress passed the Energy Policy and Conservation Act, establishing the Strategic Petroleum Reserve (SPR), which at its peak held nearly 700 million barrels, but has since declined to 350 million barrels as of 2024. On June 9, 2024, the oil-for-dollars agreement between the United States and Saudi Arabia officially expired, and Saudi Arabia announced that it would not renew the agreement.

Of course, there are also some less far-reaching strategic reserves, including uranium, rare earths, silver, and food.

Less than a year after the end of the oil-for-dollars system, the United States has established a strategic Bit reserve. This shows that the consensus on Bit as "digital gold" has become very strong.

Strategic Considerations for the US Strategic Bit Reserve

1. Consolidation of the US Dollar's Financial Hegemony

For a long time, the US dollar has dominated the global financial system and is the main settlement currency for international trade and financial transactions. However, with the changes in the global economic landscape, the rise of emerging economies, and the reshaping of the geopolitical landscape, the US dollar's financial hegemony is facing challenges.

Bit, as a decentralized digital currency, has unique advantages in global circulation, as its transactions are not controlled by traditional financial institutions and governments, and can break through geopolitical constraints to achieve rapid transactions and convenient circulation globally.

If the United States can strengthen the connection between the US dollar and Bit and Crypto, and take the lead in establishing a strategic Bit reserve, it will be able to occupy the high ground in the Crypto field, incorporate the Crypto market into the US dollar settlement system, and thus consolidate the US dollar's position in international financial transactions, which will undoubtedly be another powerful defense of its US dollar financial hegemony in the new financial era.

As Trump mentioned at the White House Crypto Summit, establishing a Bit reserve is like establishing a "virtual Fort Knox" (Fort Knox is a US base that stores the national gold reserves). He also mentioned that Congressional lawmakers are pushing for bills to provide clarity on US dollar stablecoins and the digital asset market, and he will ensure the long-term stability of the US dollar's position.

The chess pieces have been laid, and the momentum has been formed. From a top-level design perspective, this may be the first time such an idea has been publicly announced. But in fact, US companies have already been laying the groundwork in the Crypto field: in terms of asset issuance - although the industry still has reservations about the inability to achieve Trustless in the process of RWA tokenization, Franklin Templeton has become the traditional financial institution with the largest scale of US debt RWA issuance; in terms of asset securitization - the total assets under management of the US BTC spot ETFs issued by traditional financial institutions led by BlackRock have already exceeded $100 billion; in terms of asset trading and custody - Nasdaq-listed Coinbase is the main custodian of these ETFs.

What is currently lacking is a clear regulatory framework, which would allow the crypto industry to avoid similar "unclear boundary pressures" from the Biden administration, as well as the disorderly and ambiguous regulation from multiple government departments.

2. A Powerful Tool to Combat Inflation

In theory, establishing a strategic Bit reserve can to some extent hedge against inflation.

According to World Bank data, the M2 curve in the United States from 1960 to the present is as follows:

The US federal debt curve is as follows:

The total US federal government debt has exceeded $36 trillion, a historic high. Moreover, the ratio of US federal government debt to GDP has continued to rise in recent years, reflecting that the growth rate of debt has exceeded the growth rate of the economy. Due to the expansion of debt and the current high interest rates, the US federal government's interest expenditure is expected to reach about $882 billion in 2024, posing a significant fiscal burden.

Bit is "digital gold" and can be a potential "tool" to combat inflation and solve the national debt problem. All governments will stimulate the economy by issuing more currency, leading to currency depreciation and inflation. Bit has a fixed total supply, and is therefore seen as the ideal asset to hedge against inflation.

There are multiple reasons driving the US government to establish a strategic Bit reserve. In addition to consolidating the US dollar's hegemonic position and combating inflation, from the perspective of financial innovation, Bit and Blockchain have brought new development opportunities for the financial industry; from the perspective of global financial competition, as mentioned in this executive order, "the country that first establishes a strategic Bit reserve will gain a strategic advantage"; from the perspective of US government interests, Trump is fulfilling his campaign promises, and the influence of the US Crypto-related interest groups in the current Trump administration has significantly increased, affecting government decision-making.

Far-reaching Impact on the Crypto Market

Trump's Executive Order is Less Favorable than Market Expectations

There are a few key points in this executive order:

1. The Treasury Secretary should establish an office to manage and control the custodial accounts of the "Strategic Bit Reserve" (SBR), with the funding source being BTC forfeited from criminal or civil cases held by the Treasury. BTC deposited in the SBR cannot be sold.

2. The Treasury Department should establish an office to manage and control the custodial accounts of the "US Digital Asset Reserve", with the funding source being all digital assets other than BTC held by the Treasury Department. The Treasury Department should develop a responsible management strategy for the US Digital Asset Reserve (but it does not say they cannot be sold).

3. The Treasury Secretary and Commerce Secretary should develop strategies to acquire additional government BTC without increasing the budget or imposing additional costs on US taxpayers. (How to acquire more BTC? You figure it out...)

The US government currently holds about 200,000 BTC confiscated from criminal or civil cases. Trump instructed the Treasury Secretary and Commerce Secretary to develop strategies to "increase the Bit reserve holdings without any cost to taxpayers."

This executive order plan is less favorable than market expectations, mainly because the community has been excited by another federal-level bill - Senator Cynthia Lummis' "Bitcoin Act" (proposing that the US Treasury purchase 1 million BTC within 5 years and hold them for 20 years), which has already been rejected.

Federal-level Crypto-related Bills Still in Progress, with Neutral Market Impact

In the United States, there is a difference between presidential executive orders (EOs) and congressional legislation. Unfortunately, recent federal-level Bitcoin-related bills have not been successfully legislated. Currently, the federal-level Crypto-related bills in progress are three:

• H.R.148: Keep your Bits Act of 2025
• S394: GENIUS Act of 2025
• HRes111: Expressing support for Blockchain technology and digital assets.

Among them, HRes111 is a bit messy and has little content, and it is likely to fail; the Keep your Bits Act (H.R.148) proposes to protect individuals' right to self-custody their crypto assets; the GENIUS (Guiding and Establishing National Innovation in U.S. Stablecoins) Act is a regulatory Bill for U.S. dollar stablecoins, which sets licensing and reserve requirements for stablecoin issuers.

Trump stated at the White House crypto summit that he hopes to have it on his desk for signing before the August recess, mainly referring to the U.S. Stablecoin Innovation Act (GENIUS Act). The community may not have high expectations for this Bill, as it is difficult to see any substantive benefits.

Strategic Bit Reserve Acts by state governments may be expected

In addition to federal-level legislation, some state governments are also actively promoting the Strategic Bit Reserve Act, such as Arizona, Texas, New Hampshire, and Oklahoma. 5 states have already rejected it, including Montana, North Dakota, South Dakota, Pennsylvania, and Wyoming.

The process for state governments to establish a Strategic Bit Reserve Act generally requires: first, a state legislator or committee drafts and submits it to the state legislature; then it goes through voting in the state House and Senate; finally, if passed by both houses of the state legislature, it is sent to the governor for signing.

The image below shows the legislative process of the Strategic Bit Reserve Act in Arizona:

The content of the Strategic Bit Reserve Acts varies by state, for example: Oklahoma proposes to allow the state government to invest up to 10% of public funds in Bit or any digital asset with a market cap over $500 billion; Kentucky proposes to invest up to 10% of surplus cash in cryptocurrencies with a market cap over $750 billion and stablecoins with proper regulatory approval.

Overall, Trump's Strategic Bit Reserve EO is definitely a long-term positive. In terms of policies, as long as Trump's executive order does not change day and night, the policy environment will be friendly for at least the next few years. In terms of funding, although there is no plan to accumulate millions of Bits at the federal level, if the state proposals are passed, there will be real investment. In terms of market supply and demand, on the supply side, the Bits confiscated by the U.S. government will be deposited into the Strategic Bit Reserve and not sold, reducing the selling pressure in the market; on the demand side, the U.S. government's Strategic Bit Reserve decision may attract more investors' interest in Bit, including some traditional financial institutions and large enterprises, which may eliminate their concerns about engaging in crypto business and even lead to more countries establishing strategic Bit reserves.

Conclusion

Quoting Michael Saylor: History will record the moment the U.S. established a Strategic Bit Reserve - this is a turning point in 21st century finance and geopolitics.

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