Crypto Strategic Reserve: The BITCOIN Act and beyond

Over the past year, cryptocurrencies have gained more acceptance and legitimacy in the eyes of government officials and politicians. One positive result of this development is the concept of a Bitcoin and crypto strategic reserve, which aims to create a state-backed store of value similar to the more traditionally held gold reserves.

In this article, we’ll explore what a Bitcoin and crypto strategic reserve is, Trump’s executive order establishing the strategic reserve and the broader political and market implications of such a move.

Key takeaways:

• A proposed Bitcoin strategic reserve will position Bitcoin as a state-backed asset, similar to gold reserves.

• The BITCOIN Act proposes a US federal Bitcoin reserve that aims to stabilize the US dollar and reduce national debt through strategic cryptocurrency holdings.

• US President Trump has signed an executive order on a strategic Bitcoin reserve and digital asset stockpile.

Trump's signs executive order for US crypto strategic reserve

In August 2024, then-presidential candidate Donald Trump publicly supported the idea of a US Bitcoin reserve during his campaign, arguing that a state-backed digital asset would not only boost national prestige but also provide a critical counterbalance in an increasingly digital financial ecosystem.

On Mar 2, 2025, President Trump announced a broader strategic crypto reserve that would extend the idea to other major cryptocurrencies, such as ETH, SOL, XRP and ADA.

On Mar 7, 2025, Trump signed an executive order (EO) to establish a “Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile.” Both the reserve and stockpile would contain BTC and other digital assets held by the Department of Treasury that were seized from criminal proceedings. However, the EO also mentioned the possibilities of developing “budget-neutral strategies for acquiring additional bitcoin” without using public funds.

Market reaction

The initial market reaction to the Mar 2 announcement was positive. All of the coins mentioned in the reserve saw significant buying and short covering, which led to double-digit gains across the board. For example, BTC was up 12%, ETH gained 16%, SOL rallied by 28% and XRP saw a major 35% gain. ADA was the biggest gainer, rallying as high as 72% following the announcement. 

While immediate reactions were positive, there were also several prominent figures, even within the crypto community, who questioned the inclusion of other assets — apart from Bitcoin — into initiatives for the strategic crypto reserve.

However, following Trump’s executive order to establish the strategic reserve on Mar 7, BTC fell by around 5.7%, as market participants were left underwhelmed. Despite David Sacks, Trump’s crypto and AI tsar, calling the reserve a “digital Fort Knox,” investors were disappointed that this signalled no additional purchases of Bitcoin or other digital assets.

What is a Bitcoin strategic reserve?

A Bitcoin strategic reserve is essentially a state-sanctioned reserve of Bitcoin designed to function similarly to the gold reserves traditionally held by governments. It's a common practice of governments to hold gold as a reserve to protect their national currencies in case of an emergency. Gold often forms a large share of forex reserves for most countries. The table below shows the top 10 nations holding gold reserves as of Feb 7, 2025.

Source: Wikipedia

Since Bitcoin has largely gained acceptance as digital gold, the idea behind a Bitcoin strategic reserve is to create a decentralized, secure vault system whereby Bitcoin is stored and managed by federal governments. By allocating a portion of national reserves to Bitcoin, governments could theoretically strengthen their balance sheets and diversify away from fiat currencies that are vulnerable to inflationary pressures.

Proponents of such a move argue that Bitcoin’s finite supply and decentralized nature makes it an effective store of value. Its global acceptance and increasing institutional interest lend further credibility to this idea.

Senator Lummis's BITCOIN Act

In July 2024, US Senator Cynthia Lummis introduced the “Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide” (BITCOIN) Act. It’s a legislative proposal aimed at establishing a strategic Bitcoin reserve in the United States. The press release from Senator Lummis’s office outlines several critical components of the bill, as follows:

• Decentralized secure vaults: The act calls for the creation of a network of secure Bitcoin vaults operated by the US Department of the Treasury. 

• Acquiring 5% of Bitcoin’s supply: The bill authorizes a phased purchase of 1 million Bitcoin (approximately 5% of the total supply) over a predetermined period. This acquisition strategy mirrors the scale of US gold reserves.

• Funding mechanism: The acquisition program would be financed by diverting existing funds within the Federal Reserve System and Department of the Treasury, ostensibly avoiding any additional burden on taxpayers.

What does the strategic reserve mean for the future of Bitcoin?

The idea of a Bitcoin strategic reserve is innovative, and aims to use Bitcoin to improve the balance sheet of nation states. This could be a win-win, as Bitcoin would benefit from increased legitimacy while nation states would be holding an asset that potentially provides better returns than those of gold. 

While there will be no immediate acquisition of Bitcoin from the US government, the reserve implies that there will be no selling pressure from the roughly 200,000 BTC (almost $17.4 billion) held by the US government. However, it remains to be seen if other strategies to acquire additional BTC without incurring cost to US taxpayers will be implemented.

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