Bitcoin
The US government may start accumulating Bitcoin, but how and why?
As for me, I wasn’t there, but I kept an eye on the weekend’s proceedings. In my opinion (and that of many others), the main theme of this year’s Bitcoin conference was politics. This is a big departure from 2022, when I considered the theme to be open source technology.
By far the biggest “political” item everyone seems to be talking about is that the U.S. government may soon begin building a strategic reserve of bitcoin. At the conference, Sen. Cynthia Lummis (R-Wyo.) announced that she is working on a bill which would set aside the country’s existing holdings of over 200,000 bitcoins and increase them until the U.S. reaches one million bitcoins. As for those many billions of U.S. dollars in bitcoins, the government “would be required to hold 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 speech on Saturday, Trump is on board, too! On stage, he said, “And so as a final part of my plan today, I’m announcing that if I’m elected, it will be the policy of my administration… to hold 100% of all bitcoin that the U.S. government currently holds or acquires in the future… This will serve, in effect, as the core of the strategic national stockpile of bitcoin.”
“Most of the bitcoin currently held by the [government] It was obtained through police action. You know that. They took it from you. We’re going to take that guy’s life. We’re going to take his family, his home, his bitcoin. We’re going to turn it into bitcoin. It was taken from you, because that’s where we’re headed now. That’s where this country is headed – fascist rule. And then I will take steps to turn this vast wealth into a permanent national asset to benefit all Americans.”
These questions will definitely be answered in time (hopefully). But for now, I have three questions and/or thoughts at the top of my mind.
First, I have a question about the bitcoin that the US government holds. Can’t they just take the bitcoin they seized and keep it for themselves? à la civil confiscationcan they? Especially since we know for sure that about 95,000 of these bitcoins belong to people who was stolen in they for criminals. Of course, the US government has custody of 200,000 bitcoins, but it’s actually from the US government (actually, yes, since bitcoin is a bearer asset, it’s kind of It is the US government’s bitcoin, there is a lesson in there is about self-custody)? Senator Lummis is going to go to the legislature and say, “Hey, remember all those stolen bitcoins that we stole when we caught the bad guys? It’s ours now. We’re going to keep it.” I can’t imagine that’s going to be well received. So from the beginning, we have a question of provenance.
Second, if this bill becomes policy, that’s the US government going big on bitcoin, and that’s definitely… weird. To complicate matters a bit, Trump said during his speech: “The federal government has nearly 210,000 bitcoins, or 1% of the 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.”
Of course, a line in a speech is not the same as a codified law, so perhaps the US government will sell off parts of its bitcoin stash. We’ll see. And not to be overly negative, but Lummis’ plan says the US government won’t be able to sell off its bitcoin stash for 20 years. except to pay the national debt. If you thought that the the overhang of the potential sale of returned Mt. Gox coins was bad for the price of bitcoin, then imagine a million government bitcoins (that’s over $65 billion) that could be sold in the blink of an eye to pay off the national deficit. Or slowly over the course of a year. Bloodbath.
Third, and perhaps most importantly: Why? Why does the United States need a bitcoin reserve? When I think “US government reserve,” I think of the Strategic Petroleum Reserve (SPR), which is an emergency stockpile of oil held by the Department of Energy (DOE) and released into the market whenever oil is expensive or scarce for any reason. And the DOE maintains the SPR for a good reason: if all the oil in the world disappeared right this second, the entire world would fall apart. Now think about it, if bitcoin disappeared, would the entire world fall apart?
I mean, yes, I would be out of a job and probably lose a lot of money, but the whole world? And I love Bitcoin, I do, but is it necessary? What’s the point?
To be fair, the U.S. government holds a huge gold reserve, about 20% of all the gold in the world, if we are to believe presidential candidate Robert F. Kennedy Jr., who in his bitcoin conference speech one day before President Trump asked for a reserve of four million bitcoins (four times more than the Lummis account!) to match the huge share of supply in bitcoin as it does with gold. And since bitcoin is should be digital goldwhat is the difference?
The difference is that gold has been money for longer than bitcoin (and even the dollar) and, formerly, the dollar it was backed by gold, so the US government had to have gold. And it still has a lot of gold.
Either way, I hope there is more clarity, because I’m still not convinced on this and I’m looking forward to seeing our unanswered questions answered.
In the meantime, I will quote the closing words of Trump’s speech at the 2024 Bitcoin Conference: “Have fun with your bitcoin, your cryptocurrency, and whatever else you’re playing with.”
We will, President Trump. We will.
Please note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.