The US Strategic Bitcoin Reserve

Fort Knox. While I’ve never visited and rarely see a picture of it, the name alone evokes a sense of US security, leadership, and wealth. You’ve likely heard of Fort Knox too, as that is where the US stores a lot of its gold. Now the current administration wants to officially start storing up another type of currency: Bitcoin. Recently, the US announced during the White House Crypto Summit (we covered it last week) that it will soon be setting up a Strategic Bitcoin Reserve and Digital Asset Stockpile. Let’s discuss.

What is a strategic reserve?

A strategic reserve or a stockpile is a an abundance of a given commodity that is kept until needed later particularly in the case of emergency. Think of it like your own savings or maybe can goods you hold on to in case of a power outage or snowstorm, but obviously on a much bigger scale.

The US has a several strategic reserves. Maybe you’ve heard of the Strategic Petroleum Reserve, which holds an emergency supply of petroleum and refined gas. Or maybe you’ve heard of the Strategic National Stockpile, which maintains our backup medicines and medical supplies. And of course there is all the gold we keep in the Fort Knox Bullion Depository.

Why does the US want a Strategic Bitcoin Reserve?

The executive order establishing the reserve mentions a few benefits to choosing Bitcoin and having the reserve. Bitcoin is seen as a stable cryptocurrency that hasn’t been hacked and has a fixed supply. The US government sees a benefit to being one of the first countries to set up this type of reserve to store wealth for any future needs.

How will the US get the assets for the reserve?

At first the reserve will hold Bitcoin the US already has. We get Bitcoin from forfeitures or seizures dealing with criminal or civil legal action. In the past, the US would sell these assets for cash, because that is what they typically did with assets acquired through the courts. Now that it is evident that Bitcoin is popular and more valuable, the US has been holding on to these. Going forward, these seizures are the intended method for increasing the reserve.

So, is it really just going to be a reserve of Bitcoin?

The Strategic Bitcoin Reserve will have all Bitcoin. There will also be a Digital Asset Stockpile that will hold other types of digital currency.

This is awesome then, right?

Maybe, maybe not. It could be seen as the digital version of Fort Knox. However, digital currency markets may not be able to handle it if we decide to sell a bunch of our Bitcoin all at one time.

It remains to be seen how much this will benefit us. Certainly, if we had held on to the Bitcoin we acquired in the past, it would have gained value by now. I think it is forward thinking to include digital assets in our country’s, but digital currencies like Bitcoin are still relatively new and untested. For now, the risk is relatively low since the US is not currently proposing to buy Bitcoin.