The Strategic Bitcoin Reserve is here.
Following last week’s executive order creating a Strategic Bitcoin Reserve (SBR), policymakers are directed to explore creative strategies to accumulate bitcoin without increasing the federal budget or burdening taxpayers. The executive order calls for budget-neutral bitcoin accumulation, meaning that acquiring bitcoin for the reserve will be accomplished through accounting methods rather than direct market purchases. This approach is fiscally prudent and seeks to avoid the SBR becoming a political football, as the use of taxpayer funds to accumulate a volatile asset could open the administration to criticism about the use of taxpayer funds for something that most Americans don’t fully understand.
Nonetheless, the accumulation of bitcoin by sovereign states is a national security imperative. We are fortunate in the United States to have several individuals at the highest level of government who understand the strategic importance of bitcoin. But if it’s so important, how will the U.S. Treasury add to its bitcoin reserve while remaining budget-neutral?
Budget-Neutral Accumulation Explained
Budget neutrality in government policy means avoiding net changes to spending or deficits. In practical terms, that often requires offsetting any new outlay by reducing spending elsewhere or generating new revenue. When mapped onto a bitcoin strategy, it means no direct purchases on exchanges with taxpayer money. Instead, the government has to be resourceful. The executive order establishing a strategic bitcoin reserve directs the U.S. Treasury to identify ways to accumulate bitcoin without spending new money.
There is precedence for this approach. In the past, Treasury has accumulated gold reserves through mechanisms such as mandatory exchange policies or accepting gold as payment for taxes and tariffs. This allowed the government to build significant reserves without explicit deficit financing, as the gold came from internal circulation or external trade rather than borrowing or direct expenditure.
Lawmakers and advisors have floated a variety of approaches for building up a bitcoin trove in a budget-neutral way. Some of these paths seem more immediate, such as simply holding seized coins. Others would require a serious overhaul of existing laws. For each method, the unifying theme is avoiding an open-market buy. Instead, the government would gather or swap its way to a robust reserve.
Holding Seized Bitcoin
A surprising amount of bitcoin already sits in federal hands. Over many years, law enforcement agencies have seized large quantities from illicit actors, today estimated to be about 200,000 coins. Traditionally, the government auctioned these coins off and returned the proceeds to the general fund. But President Donald Trump’s recent executive order flipped that approach, instructing agencies to deposit forfeited bitcoin directly into the U.S. Treasury instead of selling it.
Swapping Gold For Bitcoin
Perhaps the boldest plan comes from Senator Lummis, who has suggested that the Treasury could swap a portion of its gold reserves for bitcoin. The United States remains one of the largest gold holders on the planet, with roughly 8,100 tons in vaults. If even a fraction of that was sold off and converted into bitcoin, the result could be a million-coin cache—around 5% of all bitcoin that will ever exist.
Surprisingly, by using some creative yet perfectly legal accounting maneuvers, gold could be swapped for bitcoin without affecting the “book value” of gold held on Treasury’s books. This is because the gold holdings are denominated in dollars, not ounces, and the valuation used by Treasury is only $42.2222 per ounce, giving it a nominal value of about $11 billion. This number was set in 1973 and never updated. This means that if Treasury would simply revalue its gold at prices closer to today’s price of about $2900 per ounce,
Tariff or Tax Revenues Collected in Bitcoin
A more experimental idea involves collecting certain taxes, fees, or tariffs in bitcoin. Think about customs duties: importers pay billions of dollars in tariffs to the government each year. Under a newly shaped policy, a slice of those payments could be remitted directly in bitcoin.
If that happened regularly, the federal government would accumulate a steady stream of bitcoin as a normal course of revenue—no open-market buy required. To address liquidity needs, the Treasury could then issue bonds backed by those coins. Investors in those bonds might receive returns partly linked to bitcoin’s appreciation. Even if some see it as a radical change to the status quo, the historical precedent is there. In the late 19th century, the U.S. insisted on payment of tariffs in gold or silver, which helped build up precious metals in federal coffers.
The Exchange Stabilization Fund (ESF)
Another method—more arcane but still a possibility worth considering—is the use of the Exchange Stabilization Fund. Traditionally, the ESF manages foreign currency operations, gold, and other financial instruments for the Treasury. Some analysts argue that bitcoin-denominated debt could slip under the ESF’s purview. In this scenario, the Treasury buys a debt instrument that’s repaid in bitcoin upon maturity, effectively funneling bitcoin into government hands without an explicit buy on exchanges. By the time the debt matures, the counterparty would settle in bitcoin—sidestepping the usual route of placing giant buy orders on public markets.
Legal experts note that such a maneuver would require significant reinterpretation of what the ESF can hold. Historically, it has been limited to foreign currencies and gold. But the concept underscores how many corners of federal finance could be explored if the political will exists.
Mining and Other Ambitious Avenues
State-backed mining is another avenue, although less mainstream in the U.S. Bhutan, for instance, has used hydroelectric power to mine bitcoin quietly, viewing block rewards as a way to accumulate over time without direct dollar purchases. The American version of that idea would be building or partnering with large-scale mining operations in regions like Texas with abundant energy resources. Though it technically requires capital investment, any robust profitability could offset costs, keeping the net effect on the budget minimal.
An even more novel twist is a government-backed “bitcoin bond,” an approach reminiscent of El Salvador’s attempt to fund infrastructure via bonds tied to bitcoin revenues. The difference in a U.S. context is scale. If the government sold billions in interest-bearing notes pegged to potential bitcoin gains, it might cover its own interest payments with profits from the coins themselves. For critics, it all sounds too complex and risky. For proponents, it’s a reflection of how flexible digital assets can be—particularly if policy makers recognize the creative potential for the many new forms of financial constructs that bitcoin technology enables.
Strategic Bitcoin Reserve: Economic and Political Implications
Building a bitcoin reserve by repurposing existing assets can feel like a clever loophole, but it raises profound issues. Supporters highlight the upside for national security and the potential to ride future price appreciation. Skeptics point to volatility, security headaches, and the risk of distorting bitcoin markets if a major government holds too large a stake. To appreciate both sides, it helps to look at historical parallels and examine how a U.S. “budget-neutral” approach might reverberate worldwide.
Historical Parallels: Gold Accumulation and Tariff Strategy
For much of American history, gold served as the backbone of the national monetary base. The government didn’t always buy gold outright at retail prices. Instead, it exploited policy levers—tariffs, fixed exchange rates, and eventually the forced sale of private gold in the 1930s—to centralize the lion’s share of the world’s bullion in U.S. vaults. By 1950, the Treasury held nearly two-thirds of global gold reserves.
The gold story offers a template for bitcoin. Rather than a direct purchase, the U.S. can re-channel existing flows (like seized assets) or reallocate existing stores of value (like gold) into a digital alternative. Back in the 1870s, tariff payments helped sustain a gold standard, channeling real gold into federal coffers. Today, a reimagined system could collect that same “hard money” in the form of bitcoin. The advantage is that bitcoin moves digitally—no need for shipments of metal. The disadvantage is that bitcoin markets are global and free-floating, so it would be challenging if not impossible for the U.S. to fix the exchange rate between dollars and bitcoin the way it once did with gold.
Possible Impact on Bitcoin Markets and Global Perception
In the near term, refusing to sell seized bitcoin has already removed tens of thousands of coins from exerting potential selling pressure in the market. Analysts point out that if the government plans to “hodl,” the risk that at any moment Uncle Sam might dump a massive trove onto the open market will be eliminated. The direct effect is arguably bullish for price stability.
From a geopolitical standpoint, a U.S. bitcoin reserve—even if it remains modest in size—will likely spark what some call “game theory.” Other nations, or even U.S. states, might fear losing out and begin formal acquisition. El Salvador’s embrace of bitcoin is a relatively small-scale phenomenon, but now that America has signaled that it views bitcoin as a serious strategic asset, the incentive for other countries to do the same will grow.
Still, not everyone welcomes government ownership of bitcoin. Some of those in the liberty movement fear that a U.S. stockpile could lead to politically motivated market distortion. For example, the purchase and sale of bitcoin could be used to move markets, akin to how the Strategic Petroleum Reserve occasionally moderates oil markets. Others worry about moral hazard: if law enforcement seizures fill the coffers, might agencies become too enthusiastic about forfeitures just to grow those reserves?
Feasibility, Risks, and the Road Ahead
Calling these strategies “budget-neutral” doesn’t negate the fact that bitcoin’s price can swing 50% in a matter of months. If the government is aiming to offset deficits, a rapid crash could hamper that objective. The last thing politicians want is to face accusations of gambling national resources on a volatile asset. Security is another concern. Managing hundreds of thousands of bitcoin introduces digital custody challenges unlike the storage of gold bars in Fort Knox.
Then there’s the legislative process. Converting gold to bitcoin or mandating tariff payments in bitcoin would likely require congressional approval. As any observer of Washington politics knows, forging a consensus is no small task. Trump’s executive order about seized bitcoin mostly stayed within executive purview, but bigger moves will demand broader buy-in. Senator Lummis’s bill calling for a million-coin reserve explicitly references “diversifying existing funds” rather than earmarking fresh dollars, but that alone doesn’t guarantee an easy path through Congress.
Still, proponents see momentum. Even symbolic steps—like halting auctions of seized bitcoin—carry weight in how markets view the asset and how states or other governments might approach it. If the Treasury were to publicly pivot assets from gold into bitcoin, it would be the clearest sign yet of a watershed shift in monetary policy. That might challenge the status quo of the U.S. dollar’s hegemony or, as Lummis insists, “supercharge the dollar” by pairing it with the qualities of hard-capped digital scarcity.
How this all shakes out remains to be seen. Some analysts suspect the U.S. will remain cautious, aiming to test the waters by simply locking seized coins away. Others think we’re on the verge of a more sweeping transformation, akin to FDR’s revaluation of gold in the 1930s. Either way, the concept of a budget-neutral bitcoin accumulation in a strategic bitcoin reserve is no longer fantasy—it has already started, in embryonic form, with the bold step of refusing to liquidate seized bitcoin. Whether or not these seeds grow into a full-fledged “Fort Nakamoto” will depend on political will, creativity, and the ability of policy makers to envision a bright orange future.
