- The potential for a national bitcoin reserve has faded, and some states have also voted down the idea.
- Unease around recent crypto volatility sparked bipartisan pushback in Montana and Wyoming.
- Some states are still pushing ahead on the idea, with Utah likely to have the first state reserve.
A quarter of US states have been racing to create the country’s first cryptocurrency reserve, but some are abandoning the effort before they reach the finish line.
Once a key piece of the bitcoin bull case under President Donald Trump, the idea of a bitcoin national reserve has lost momentum. Instead, the administration is pushing ahead with deregulation and an effort to create a framework for stablecoins.
Meanwhile, at the state level, crypto reserve bills have already failed to advance in five state legislatures, with lawmakers in Montana, Wyoming, North Dakota, South Dakota, and Pennsylvania voting down the idea.
“There is resistance to crypto reserves among certain states primarily due to concerns over bitcoin’s volatility and its suitability as a reserve asset,” 21Shares crypto research strategist Matt Mena told Business Insider.
The flurry of downvotes has clouded what some analysts feel is a bullish development nationwide. Many, including Mena, have previously predicted that turning bitcoin into a reserve asset could spark a wave of similar moves globally, boosting the apex token’s price dramatically as more governments buy the token.
Including the five states that voted against it, 24 governments have at least considered a digital assets reserve, with crypto often perceived as an inflation hedge on par with gold.
Lawmakers have butted heads over whether crypto investments are a good use of taxpayer money. Criticism has focused on the volatility associated with the crypto tokens.
This legislative pushback doesn’t appear to be partisan, either, with state-level Republicans voting alongside Democrats to reject these efforts.
“I am not signing on to that stuff and I can’t imagine a majority of your constituents want you to,” Republican Bill Mercer reportedly told the Montana House of Representatives this week.
Yet industry advocates reject volatility as a viable argument to keep crypto out of government treasuries, and Mena noted that bitcoin has exhibited lower volatility than reserve assets such as oil at certain periods.
“Bitcoin has gone in one direction in the last number of years, and generally that’s up and to the right,” said Brian Morgenstern, head of public policy for Riot Platforms. While the dollar index has gained around 8.7% in the past five years, bitcoin has soared over 845%.
“I understand the concern about volatility, but you have to zoom out a little bit and when you do that, the value proposition becomes much more clear,” he told BI.
It’s a message at least some states are embracing even as others back away from crypto.
Legislators i Texas and Arizona are successfully pushing crypto reserve bills forward, and Utah appears set to be the first state poised to turn the idea into actual policy. If approved, its bill would allow the state treasurer to invest as much as 5% of specific public funds into digital assets with a market capitalization of over $500 billion in the past 12 months. Only bitcoin fits the description.
To Johnny Garcia, managing director of institutional growth and capital markets at VeChain Foundation, the holdout of some states against crypto reserves shouldn’t be altogether seen as a negative.
“We should expect (and hope) that states take their time to analyze and debate these proposals thoroughly. Secondly, where states have rejected the idea, it has been by a fairly fine margin, or they have simply run out of time,” he told BI over email. “Finally, and perhaps most importantly, the imperative of being the “first mover” – to be the state that beats the other 49, and even the Federal government, to establish a reserve – is dwindling.”
All this may inform what happens at the federal level. Since President Donald Trump’s inauguration, all eyes have been on whether Washington establishes a national bitcoin reserve.
While this helped spur the bullish mood after the election, bitcoin investors have been disappointed so far by the administration’s approach to crypto, which, to date, includes an executive order for the government to consider a “digital assets stockpile.”
The Securities and Exchange Commission has also abandoned lawsuits against Coinbase and Robinhood, emphasizing the president’s message of looser rules for the industry.
