In a bold move to woo crypto-focused voters ahead of the November election, Republican presidential candidate Donald Trump announced a plan to establish a state bitcoin reserve. Speaking to an enthusiastic crowd at a cryptocurrency convention in Nashville in late July, Trump declared, “Never sell your bitcoin,” and outlined his vision for a national bitcoin stockpile.
“If 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,” Trump stated. He emphasized that these funds would form the “core of the strategic national bitcoin stockpile.”
Trump is not alone in his ambitious crypto plans. U.S. Senator Cynthia Lummis has proposed legislation for the U.S. government to purchase 1 million bitcoins, representing approximately 5% of the total supply. Independent candidate Robert F. Kennedy Jr. has gone even further, suggesting a government stockpile of 4 million bitcoins.
The Government’s Crypto Cache
The U.S. government currently holds a significant amount of bitcoin, valued at around $11.1 billion. This includes approximately 203,239 bitcoin tokens, amassed primarily through criminal seizures, including from the infamous Silk Road online marketplace, shut down in 2013. At present, this represents about 1% of the global bitcoin supply, which stands at approximately 19.7 million tokens, according to Blockchain.com. The total supply of bitcoin is capped at 21 million coins.
Comparatively, major non-state investors also hold substantial bitcoin reserves. Michael Saylor’s MicroStrategy holds about 226,500 bitcoin tokens, while BlackRock’s iShares Bitcoin Trust and Grayscale Bitcoin Trust hold 344,070 and 240,140 tokens, respectively.
Potential Impact on Bitcoin Market
The idea of a government-held bitcoin reserve has generated mixed reactions. Mark Connors, head of global macro at Onramp Bitcoin, suggested that such a move could positively impact bitcoin prices. “It would have a positive impact on price. It would have to because we’ve never had such a limited supply commodity, albeit digital, assume a new state of a reserve asset,” Connors remarked.
However, the implications for the crypto market are complex. A government reserve could reduce the number of tokens available for trading, potentially exposing investors if the government decides to sell part of its holdings. Connors pointed out that the proposal by RFK Jr. to hold 19% of the bitcoin supply, akin to the gold reserves, might not sit well with bitcoin enthusiasts.
Global Context and Speculation
Beyond the U.S., other governments also hold significant bitcoin reserves. China, for instance, is reported to be the second-largest government holder with 190,000 coins.
The concept of a national bitcoin reserve raises several questions. Some experts, like Connors, suggest the Federal Reserve could manage the reserves for the Treasury Department, similar to its role with gold. Alternatively, the reserve could function like the Strategic Petroleum Reserve, with varying degrees of control shared between the president and Congress, as noted by Frank Kelly, senior political strategist at asset manager DWS Group.
Kelly highlighted the complexity of the proposal, stating, “There’s a lot to parse and figure out there.”
The Irony and Political Implications
The idea of a government-controlled bitcoin reserve stands in stark contrast to the original decentralized and anti-government ethos of bitcoin. This irony is not lost on the crypto community, yet many market participants are pleased to see cryptocurrency becoming a significant campaign issue.
Regardless of the outcome, Trump’s proposal has undeniably thrust bitcoin into the political spotlight, reflecting its growing influence in the financial landscape and the broader public consciousness.
