A strategic Bitcoin reserve in the United States reduces the possibility that the government will ever “ban” the cryptocurrency and could encourage many more nations to adopt Bitcoin, according to crypto observers. On March 7, US President Donald Trump signed an order establishing a Strategic Bitcoin Reserve and a digital asset stockpile. White House crypto czar David Sacks stated that the reserve would be capitalized with “Bitcoin owned by the federal government that was forfeited as part of criminal or civil asset forfeiture proceedings,” estimated at around 200,000 BTC. This apparently disappointed traders, as it led to an immediate 6% fall in the price of Bitcoin. However, many say the markets may have it wrong, and the news should be viewed as bullish.
Government less likely to “ban” Bitcoin
Bitwise chief investment officer Matt Hougan said one of the impacts of a US strategic Bitcoin (BTC) reserve (SBR) is that it “dramatically reduces the likelihood the US government will someday ‘ban’ Bitcoin.” In November, the Federal Reserve Bank of Minneapolis suggested that Bitcoin could one day force the federal government to balance its budget. “A legal prohibition against Bitcoin can restore unique implementation of permanent primary deficits, and so can a tax on Bitcoin,” it said at the time.
Other nations could follow suit
The US Bitcoin reserve also dramatically increases the chances that other nations will establish Bitcoin reserves and accelerates the speed at which other nations will consider establishing them, said Hougan, as it creates a short window for them to “front-run” potential Bitcoin buying by the US. The US is the global leader in nation-state Bitcoin holdings, with 207,189 BTC worth around $18 billion at current prices, according to BitBO. China is estimated to come in second with an estimated 194,000 BTC, followed by the United Kingdom, holding 61,000 Bitcoin. El Salvador is the only country to have designated BTC as legal tender. It is still accumulating and currently holds 6,103 BTC worth around $534 million, according to the nation’s Bitcoin Office. “I expect many of the G20 to take notice and eventually follow America’s leadership,” said Coinbase CEO Brian Armstrong.
Legitimizes Bitcoin in the eyes of institutions
Hougan also opined that a US Bitcoin strategic reserve makes it much harder for institutions such as agencies like the International Monetary Fund “to position Bitcoin as somehow dangerous or inappropriate to hold.” The IMF has been against sovereign nations, such as El Salvador, investing in BTC. On March 3, the IMF approved a funding program with El Salvador for $1.4 billion on the condition that it downgraded its Bitcoin accumulation strategy. The memorandum of understanding indicated a condition of “no voluntary accumulation of BTC by the public sector in El Salvador.” Bitwise head of research Ryan Rasmussen continued with the notion, saying that the end game was never “the US government buys all of the world’s Bitcoin.” He listed what the US SBR means: “Other countries will buy BTC, wealth managers have no excuse, financial institutions have no excuse, pensions and endowments have no excuse, fear of the US selling is gone, the US will likely buy more, likelihood of states buying just went up, and the probability the government outlaws Bitcoin is definitively zero.”
The co-founder and CEO at Lightspark, David Marcus, simply said, “This is a balanced outcome and the right decision for now,” adding he was “happy reason has prevailed.”
Bitcoin has come a long way
Meanwhile, crypto lawyer John Deaton points out that Treasury Secretary Scott Bessent and Secretary of Commerce Howard Lutnick “have been directed by the POTUS to find ‘budget neutral’ ways to acquire BTC.” “Two years ago, we would’ve been laughed off stage for suggesting that such a thing could happen.” It was only a year ago that regulators approved the first US spot Bitcoin ETF, added ETF Store President Nate Geraci. Bitcoin is currently rebounding, having reached $88,000 at the time of writing.