As for me, I wasn’t there, but I kept my eye on the weekend’s proceedings. In my view (and many others), the main theme from this year’s bitcoin conference was politics. This is quite the divergence from 2022 when I took the theme to be open-source technology.
By far the leading “political” item everyone seems to be talking about is that the U.S. government could soon begin to build a strategic reserve of bitcoin. At the conference, Sen. Cynthia Lummis (R-Wyo.) announced she is working on a bill that would set aside the country’s existing holdings of more than 200,000 bitcoins and add to it until the U.S. builds to a million bitcoins. As for these many billions of U.S. dollars of bitcoins, the government “would be required to hold onto the Bitcoin for 20 years, the only thing it could be used to pay for during that time period is paying down our country’s national debt.”
And based on his Saturday speech, Trump is on board too! On-stage he said, “And so, as the final part of my plan today, I am announcing that if I am elected, it will be the policy of my administration … to keep 100% of all the bitcoin the U.S. government currently holds or acquires into the future … This will serve, in effect, as the core of the strategic national bitcoin stockpile.”
“Most of the bitcoin currently held by the [government] was obtained through law enforcement action. You know that. They took it from you. Let’s take that guy’s life. Let’s take his family, his house, his bitcoin. We’ll turn it into bitcoin. It’s been taken away from you, because that’s where we’re going now. That’s where this country is going to – fascist regime. And so I will take steps to transform that vast wealth into a permanent national asset to benefit all Americans …”
These questions will be answered, definitively, in time (one hopes). But for now, I have three questions and/or thoughts top of my mind.
First, I have a question about the bitcoin the U.S. government holds. They can’t just take the bitcoin it seized and keep it for itself à la civil forfeiture, can they? Especially since we know for a fact that roughly 95,000 of those bitcoins belong to people who had it stolen from them by criminals. Sure, the U.S. government has custody of 200,000 bitcoins, but is it really the U.S. government’s (actually, yes, since bitcoin is a bearer asset, it sort of is the U.S. government’s bitcoin, there’s a lesson in there about self-custody)? Is Sen. Lummis going to go in front of the legislature and say: “Hey, remember all those bitcoins that were stolen that we stole back when we caught the bad guys? It’s ours now. We’ll keep it.” I can’t imagine that going over well. So from the get, we have an issue of provenance.
Second, if this bill becomes policy, this is the U.S. government going long on bitcoin and that’s definitely… weird. Somewhat complicating matters, Trump said during his speech: “The federal government almost has 210,000 bitcoin or 1% total supply that will ever exist. But for too long our government has violated the cardinal rule that every bitcoiner knows by heart: Never sell your bitcoin.”
Obviously a line from a speech is not the same as codified law, so maybe the U.S. government will sell through parts of its stock of bitcoin. We’ll see. And not to be overly negative, but Lummis’s plan says the U.S. government won’t be able to sell its bitcoin stash for 20 years, except to pay off national debt. If you thought the overhang of the potential sale of returned Mt. Gox coins was bad for bitcoin’s price, then imagine a million government bitcoins (that’s more than $65 billion) which might be sold at the drop of a hat to pay down the national deficit. Or slowly over the course of a year. Bloodbath.
Thirdly, and perhaps most importantly: Why? Why does the United States need a reserve of bitcoin? When I think of “U.S. government reserve,” I think of the Strategic Petroleum Reserve (SPR) which is an emergency stockpile of petroleum maintained by the Department of Energy (DOE) and released into the market whenever petroleum is expensive or scarce for whatever reason. And the DOE maintains the SPR for a good reason: If all the petroleum in the world disappeared right this second the entire world would fall apart. Now just think, if bitcoin disappeared, would the entire world fall apart?
I mean, yes, I’d be out of a job and I’d probably lose a lot of money, but the entire world? And I love Bitcoin, I do, but is this necessary? What’s the point?
In fairness, the U.S. government does hold a huge reserve of gold, ~20% of all gold in the world, if presidential candidate Robert F. Kennedy Jr. is to be believed, who in his bitcoin conference speech the day before President Trump called for a four million bitcoin reserve (four times as much as the Lummis bill!) to match the massive share of supply in bitcoin as it does with gold. And since bitcoin is supposed to be digital gold, what’s the difference?
The difference lies in that gold has been money for longer than bitcoin (and the dollar even) and, once upon a time, the dollar was backed by gold, so the U.S. government had to have gold. And it still holds a lot of gold.
Anyway, I hope more clarity comes, because I’m not quite buying this yet, and I look forward to seeing our unanswered questions answered.
In the meantime, I will lift the closing words from Trump’s 2024 Bitcoin Conference speech: “Have a good time with your bitcoin and your crypto and everything else that you’re playing with.”
We will, President Trump. We will.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
