According to Cointelegraph, United States Senator Cynthia Lummis, often referred to as the "Crypto Queen" of Capitol Hill, has announced plans to establish a strategic Bitcoin (BTC) reserve. This announcement, made shortly after Donald Trump's re-election, could potentially reshape the US fiscal strategy. However, it also raises questions regarding its feasibility, impact on US debt, policy barriers, and market volatility.
Historically, the United States has relied on gold reserves to stabilize and strengthen the dollar. As of September 2024, the US holds approximately 8,133 metric tons of gold, significantly more than Japan’s 845 tons and China’s estimated 2,113 tons. The Eurozone collectively holds around 10,784 tons. These vast stores of physical gold are valued for their liquidity, security, and role in supporting national economic stability. In contrast, a hypothetical $200 billion Bitcoin reserve would represent less than 2.5% of the current global gold reserves’ value, raising questions about its strategic impact.
The newly elected Trump-Vance administration could potentially issue an executive order directing the Treasury to allocate specific funds toward Bitcoin acquisition. In 2022, President Biden authorized the release of 180 million barrels from the Strategic Petroleum Reserve to address soaring fuel prices. In this scenario, Bitcoin would be treated as a strategic asset rather than currency, potentially bypassing certain regulatory hurdles. A larger and sustained Bitcoin reserve would likely require Congressional approval, as it would involve multi-year budgeting. Despite Trump's crypto-friendly stance, opposition from traditionalists within Congress, who might view Bitcoin as too speculative or risky for national reserves, could stall this proposal.
Operationally, the US Department of Treasury could manage this reserve, similar to how it handles gold, with Bitcoin acquired through diversified funds within the Federal Reserve System. Implementing this initiative faces notable challenges, as Senate and House oversight would likely scrutinize the risk of adding such a volatile asset to the national balance sheet, especially with bipartisan concerns about cryptocurrency’s long-term stability.
With inflation concerns still a major issue, any plan involving Bitcoin could meet resistance from both the public and policymakers. More importantly, even a $200 billion Bitcoin fund would still be a fraction of the US debt, currently at $35.9 trillion. It is unlikely that such a proposal would gather enough legislative support in the near term, even though executive orders can initiate limited government actions. Large-scale asset purchases would demand Congressional cooperation, making a full-scale reserve unlikely within the next two years. As the upcoming administration grapples with this proposal, the outcome will depend on a balance between economic strategy and political feasibility. For now, Bitcoin's path to becoming a national reserve asset remains fraught with obstacles.
