Is It Justifiable for Taxpayers to Support a Strategic Bitcoin Reserve?
In recent times, there has been talk among politicians about the establishment of a Strategic Bitcoin Reserve. At the Bitcoin 2024 conference, Donald Trump pledged that if he were to become president, the federal government would retain the bitcoins it currently possesses and those it acquires through law enforcement activities in the future. Presently, the US government holds about 212,848 bitcoins out of the approximately 19,732,900 in circulation, forming the foundation of a Strategic National Bitcoin Stockpile.
Another presidential candidate, Robert F. Kennedy Jr., also proposed a plan at the same conference. He suggested that the government should maintain its existing bitcoin holdings and acquire 550 bitcoins daily until it amasses at least 4 million bitcoins, which is nearly 20% of the total possible supply. The funding source for this acquisition was not explicitly outlined, but if debt were to be utilized, it could amount to around $13 billion annually at current prices, a relatively small figure compared to the existing deficit.
Additionally, Senator Lummis from Wyoming introduced a bill at the conference to establish a strategic bitcoin reserve of one million bitcoins to be held for a minimum of 20 years. The primary objective of this proposed legislation is to boost returns on the Treasury’s assets, such as gold, and assist in reducing the national debt.
While the financial figures involved are substantial on an individual level, they are not extraordinary compared to other recent government initiatives. Despite variations in the specifics, all these proposals center around the federal government holding a significant amount of bitcoin for an extended period.
The arguments for the government holding bitcoins are partly based on anticipated significant future returns, as highlighted by Senator Lummis. However, the actuality of these extraordinary returns remains uncertain. The proposed bitcoin reserve differs from commodity reserves like the US strategic oil reserve and is more akin to the country’s gold holdings, which have no direct link to the US dollar since 1971.
Considering the gold reserve primarily as an investment asset, there seems to be no compelling reason to exclusively focus on gold over other assets, including cryptocurrencies like bitcoin. Instead, a more viable approach could involve selling the gold reserve and utilizing the proceeds to reduce taxes temporarily, pay down government debt, or increase spending for a limited period.
By allowing taxpayers the freedom to decide how to use the funds resulting from selling the gold reserve, individuals could make choices based on their preferences, whether investing in bitcoin, gold, paying off debts, or other financial activities. Ultimately, the decision to acquire bitcoin as part of a strategic reserve could be seen as contradicting the financial freedom that digital currencies like bitcoin aim to provide, potentially leading to partial nationalization and limiting individual financial autonomy.
