- Bitcoin supporters want a taxpayer-funded reserve.
- A Senate bill was referred to committee.
- A new narrative is taking shape.
It’s an idea that has long been dismissed as outlandish, outrageous, and pretty much impossible.
And yet the notion of a US Bitcoin Strategic Reserve — pouring billions or even trillions of taxpayer dollars into a crypto fund — is actually beginning to gain some traction now that Donald Trump is president.
Saylor effect
Senator Cynthia Lummis, a Republican from Wyoming, has introduced a bill calling for the formation of such a fund.
And Michael Saylor’s accumulation of Bitcoin in the coffers of MicroStrategy has demonstrated the benefits of stockpiling the top cryptocurrency — the software firm’s stock has skyrocketed almost 400% in the last 12 months even though its revenue is at a 15-year low.
Saylor’s strategy has inspired shareholder activists to try and get Big Tech players such as Microsoft and Amazon to do the same. And it’s given the Bitcoin reserve idea some mojo as well.
“Donald Trump was sworn in at noon on January 20 and at 12:01 everyone wanted a Bitcoin Strategic Reserve,” said Anthony Scaramucci, the crypto investor and hedge fund manager, at a London conference this month.
1 million Bitcoin
Lummis’ bill calls for the purchase of 1 million Bitcoin over 5 years, in part to serve as a kitty for paying down the national debt following in the subsequent two decades.
The legislation is scheduled to be heard by the Senate Committee on Banking, Housing and Urban Affairs later this year.
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Anything can happen on Capitol Hill, of course, and the bill may never get out of that committee.
But a narrative is forming that the BSR, as it’s known in crypto circles, would be an invaluable bulwark against the stresses of the eye-watering US fiscal deficit and its debtload.
In the current fiscal year, the US government is already running in the red by $710 billion, according to US Treasury data. And the national debt is $36 trillion.
“A Bitcoin reserve can send a symbolic message of leadership and innovation” while acting as a hedge against an uncertain future, Matthew Sigel, the head of Digital Assets Research with VanEck, the asset management firm, told DL News.
Radical reworking
For his part, Saylor says a BSR could sell off Bitcoin at market highs and apply the proceeds — he estimates at $13 to $16 trillion — to pay down the national debt.
Still, sceptics caution that the BSR would be such a radical reworking of the US’s fiscal picture that it would meet stiff resistance.
“Seems the probability of a strategic reserve is low,” Geoffrey Mak, global head of digital assets research for Standard Chartered, told DL News.
One thing is certain — the advent of a Bitcoin Strategic Reserve would reshape the $3.3 trillion crypto market.
“Assuming that a Bitcoin Strategic Reserve was to be created, this is the ultimate legitimizing of Bitcoin,” Seattle Smith, CIO and CEO of Baus Capital, told DL News.
Moreover, the fact that the president and his family are personally building a crypto empire may further shape the prospects of a Bitcoin Strategic Fund.
Trump’s crypto empire
On Wednesday, the Trump family’s World Liberty Financial said it plans to amass a “strategic token reserve” as part of an effort to “enhance stability” of the company and foster adoption of crypto and its own products.
Investors on the sidelines caught between curiosity and worry over the crypto market’s volatility may finally jump in, Smith said. The BSR would draw “a new wave of retail buyers into the equation.”
Andrew Flanagan is a writer at DL News. Contact him at aflanagan@dlnews.com. Edward Robinson is the story editor for DL News. Contact the author at ed@dlnews.com.
