Proponents of bitcoin were very excited about the prospects of President Donald Trump creating a bitcoin strategic reserve. This prospect was fueled by support from Senator Cynthia Lummis, Republican of Wyoming, who last year introduced S.4912, the BITCOIN Act of 2024.
S.4912 would require the Secretary of the Treasury to establish a “decentralized network of secure Bitcoin storage facilities distributed across the United States, collectively to be known as the Strategic Bitcoin Reserve for the cold storage of Government Bitcoin holdings.”
Beyond being introduced twice and referred to the U.S. Senate Committee on Banking, Housing and Urban Development, no other action was taken on the bill. It effectively died in the 118th Congress.
Part of the rationale from S.4912 for a bitcoin reserve was the recognition that bitcoin plays a role in “enhancing the financial leadership and security of the United States in the 21st century global economy.” “Bitcoin can provide a hedge against economic uncertainty and monetary instability. Bitcoin, as a decentralized and finitely scare digital asset, offers unique properties that complement existing national reserves, strengthening the position of the United States dollar in the global financial system.”
So far in this current 119th Congress, the Senate banking committee has not placed any legislation on its docket that addresses the creation of a bitcoin reserve. Senator Lummis in the meantime has secured a position as chairman of a Senate sub-committee on digital assets.
As for President Trump’s management of the issue of a bitcoin strategic reserve, his efforts appear limited to establishing a working group on digital assets as announced last Thursday via an executive action.
These two initiatives, the formation of a working group on digital assets and the establishment of a Senate sub-committee on digital assets should signal two things to the Bitcoin Bros.
First, campaign promises do not equate to well thought-out public policy. This promise was made during a presidential campaign with a U.S. Congress split between the Democrats and the Republicans. With the majority of Americans still not holding any bitcoin (half of us don’t even have a thousand dollars for an emergency), it was easy for then candidate Trump to make a low-cost gesture to the monied class that do hold bitcoin.
Second, is a bitcoin strategic reserve even constitutional? Congress has a duty to regulate the value of coined money. Reserve currencies are held to create a buffer against economic shocks. They are also used as a tool to intervene in currency markets to either strengthen or weaken the domestic currency according to that country’s trade goals. This requires that the currency used for the purpose of intervention be viewed as a currency that has demand as a medium of exchange. The currency has to exude stability.
Bitcoin proponents should temper their enthusiasms about a strategic reserve with the reality of political delay and the acknowledgement of the constitutional issue of protecting the value of US currency.
Alton Drew
27 January 2025
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