Prominent politicians, including a sitting member of the Senate Banking Committee, want the federal government to play an active role in the
During Bitcoin 2024, a conference held over the weekend in Nashville, Sen. Cynthia Lummis, R-Wyo., announced legislation that would require the U.S. government to acquire roughly 5% of the
At the same event, Republican presidential nominee Donald Trump endorsed the federal government treating bitcoins seized from criminals as an investment. Meanwhile, Robert F. Kennedy Jr., who is running a longshot independent bid for the White House, called for purchasing 4 million bitcoins, roughly quadruple what the Lummis proposal calls for.
The machinations of these policies are fuzzy. For example, Lummis called for financing the strategic reserve with "excess reserves" at the 12 Federal Reserve Banks, though the term "excess reserves" was retired in 2020 when the Fed eliminated its policy on minimum reserve requirements. When such reserves existed, those funds belonged to commercial banks, not the government.
Caitlin Long, founder and CEO of Custodia Bank and strong advocate of the crypto industry, said in a post on X — formerly known as Twitter — that the senator misspoke.
"Yeah, I wouldn't have used the term 'excess reserves' here [because] that's a defined term in banking and it's not what [Lummis] means here," Long wrote. "As she said, the bill hasn't been released yet and she's welcoming co-sponsors. When the bill draft is out, I believe this will all become clear."
For now, it is also unclear how the strategic reserve would be managed or how holding bitcoin would achieve the stated purpose of the proposal: Bolstering the price of the U.S. dollar, reining in inflation and reducing the national debt. Lummis equated the proposed reserve to the government's gold bullion holdings as well as its emergency stock of oil, though neither of those are used to influence currency prices or government finance.
Lummis's office did not respond to a request for comment on Monday.
George Selgin, director emeritus of the Center for Monetary and Financial Alternatives at the libertarian Cato Institute, said the proposal, as it stands, would be a boon to bitcoin investors while delivering little for the general public.
"I do not see any strategic rationale for a bitcoin stockpile comparable to those offered for stockpiling oil and various minerals and medical supplies. Nor is the U.S., like other nations, in need of maintaining stocks of foreign currency of various kinds — the dollar's well-established position as by far the world's preferred international exchange medium makes that unnecessary," Selgin said. "Instead, arguments for government stockpiling of BTC seem more reminiscent of those for stockpiling cheese or … silver, which the U.S. stockpiled for decades after the 1934 Silver Purchase Act, for no good reason."
Jess Cheng, a partner at the law firm Wilson, Sonisi, Goodrich & Rosati and a former payments lawyer for the Fed, said the Lummis policy proposal is hard to analyze given its lack of publicly available details. But, she noted, the move to create such a reserve would be "unprecedented" and bring with it numerous ramifications for the Fed as well as the banking sector.
One foreseeable result of the shift, Cheng said, would be an added layer of legitimacy for bitcoin and digital assets more broadly. It would be difficult, she added, for the Fed to engage the crypto sector on one side of the house and remain resistant to it from a supervisory perspective.
"It would force the Fed to, in a lot of ways, make decisions, to act in a space where it otherwise wouldn't, because it's pulled into having the active role if this proposal were to happen," she said. "There's an implicit endorsement, in some ways, when the Fed acts. Nuances matter, context matters, but the Fed is making a statement when it's actively involved in something."
During the Bitcoin 2024 event, Trump delivered a speech praising bitcoin as the "steel industry of 100 years ago," and vowed to take steps to ensure American supremacy in the cryptocurrency production space, including scaling back regulatory hurdles and expanding energy production through greater use of fossil fuels and nuclear reactors.
Trump pledged to fire Securities and Exchange Commission Chair Gary Gensler, shutdown "Operation Choke Point 2.0" — the crypto industry's shorthand for the federal government's various efforts to curb illegal activity in the crypto space — and produce regulations for the crypto space within his first 100 days in office. He also outlined his view for how a reserve of bitcoins might be amassed.
"If elected, it will be the policy of my administration, the United States of America, to keep 100% of all the bitcoins the U.S. government currently holds or acquires in the future," Trump said. "We'll keep 100%. I hope you do well, please. This will serve as the core of the strategic national bitcoin stockpile."
Kennedy called for purchasing 550 bitcoins per day until the government reaches his goal of 4 million bitcoins. There are currently 19.7 million bitcoins in circulation, with 1.2 million set to be released in predetermined volumes every four years.
Other lawmakers have expressed at least tacit support for the idea of creating a bitcoin reserve. The ranking member of the Senate Banking Committee, Sen. Tim Scott, R-S.C., who also spoke at the conference, said he would be open to the idea of the government building up a supply of the cryptocurrency,
"As I highlighted last week, bitcoin has the potential to democratize the financial world and improve financial inclusion, and we need to ensure we have fair rules of the road that encourage innovation here in the United States, not overseas," Scott said. "I look forward to working with members of the Senate Banking Committee to advance digital assets legislation — through regular order — that will both protect consumers and promote opportunity."
But skeptics say claims of financial inclusion and democratization attached to cryptocurrencies are often overblown. Graham Steele, the former Biden administration Treasury undersecretary for financial institutions, said those labels cloud the fact that assets' "one essentially use case as a tool is for money laundering, sanctions evasion and cyber crimes."
Steele said the idea of having the government engage in such a fraught and volatile market would be dismissed as "radical" just a few years ago. That established lawmakers and a major party presidential candidate have endorsed it stand as proof, in his eyes, of the impact of crypto lobbying and the confidence Republicans have in their electoral prospects this fall.
"This whole movement and its supporters might feel like, frankly, the election is going to go the way they want it to go, so they're thinking about their best case here and putting some of these more radical ideas forward, which says more about their political prospects than anything else," Steele said. "But the Overton Window moves. This is the big crazy idea that could pave the way for [the Financial Innovation and Technology for the 21st Century Act] or the stablecoin bill to pass with bipartisan support."
