Crypto reserves: no public good, no principles

Crypto reserves: no public good, no principles

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Donald Trump has signed an executive order creating both a “strategic bitcoin reserve” and a “digital asset stockpile”, turning the federal government into a permanent HODLer of the billions of dollars worth of crypto assets seized by law enforcement. The policy represents a striking departure from bitcoiners’ historical skepticism of government market intervention, and simultaneously fails to articulate how it serves any genuine national interest.

What are these?

In the executive order, the Trump administration has separated crypto assets into two piles: bitcoin, and everything else.

The bitcoin pile is dubbed the “strategic reserve”, and consists of the bitcoins forfeited in criminal or civil proceedings. The order carves out the possibility that additional bitcoin could be proactively acquired for the stockpile, so long as “such strategies are budget neutral and do not impose incremental costs on United States taxpayers”. This addendum was likely added in hopes of bypassing the need for Congressional approval. Another clause in the executive order states that bitcoins in the reserve “shall not be sold and shall be maintained as reserve assets of the United States utilized to meet governmental objectives”.

The pile of other assets is the “digital asset stockpile”, and is similarly capitalized by existing crypto assets forfeited through legal proceedings. There is no carve-out for acquiring additional assets in other ways, budget neutral or otherwise, without “further executive or legislative action”. There is also no specific limitation on selling the alternative assets in the stockpile, besides restricting that decision to the Treasury Secretary.

What are the policy reasons for these holdings?

Donald Trump has been very direct that the purpose of the reserve is to bolster the cryptocurrency industry, writing earlier in the month that “A U.S. Crypto Reserve will elevate this critical industry after years of corrupt attacks by the Biden Administration.”¹ Keeping a fairly large chunk of bitcoin out of circulation by placing it in a strategic reserve with strict limitations on sales would reasonably serve to increase bitcoin prices somewhat, due to a reduction in circulating supply. It’s also a stamp of approval that may encourage others to buy in. In fact, the executive order seems to expressly suggest that other countries might follow suit, noting that “there is a strategic advantage to being among the first nations to create a strategic bitcoin reserve”.² All of this serves to benefit the cryptocurrency industry and those who hold bitcoin and (to a lesser degree) other stockpile assets. Notably, Trump, his family members, and others in his administration are among those who stand to benefit financially from the resulting price increases.

But aside from people who personally hold cryptocurrencies and stand to profit, how is this a good thing? How is this useful to the country and most of its citizens, rather than just one specific industry?

Those are questions that Trump and his administration have largely not even bothered to try to answer. Perhaps the closest we’ve seen to a justification has come from “Crypto Czar” David Sacks, who reiterated that the US would not sell any of the bitcoin and wrote on Twitter that “It will be kept as a store of value. The Reserve is like a digital Fort Knox for the cryptocurrency often called ‘digital gold’”. But this argument doesn’t really stand up to scrutiny, even setting aside the already questionable nature of bitcoin’s usefulness as a “store of value”. If an asset will indeed never be sold, how would the US draw upon its stored value in order to, say, backstop the dollar or pay outstanding debts? What’s the point of a store of value if that value can never be accessed?

Perhaps Trump or some future president would renege on this promise to HODL the bitcoin in the reserve and instead opt to sell it to use for some purpose. But the United States is already one of the largest holders of bitcoin, and its occasional sales of these assets historically cause substantial market volatility. Now the government stands to become an even larger holder, and its new policy stance to never sell the bitcoin means that any later deviation would likely cause additional fear among the rest of the market. It would be Schrödinger’s bitcoin: valuable only so long as the US never tried to access that value.

How did we get here?

The seeds of this policy were planted during a bizarre bidding war at the Bitcoin 2024 conference last July. It was still a month before Robert F. Kennedy Jr. would withdraw his candidacy and join up with Team Trump, and RFK Jr. had earned elated cheers from the main stage a day before Trump’s address when he promised that the US government under his leadership would acquire 4 million bitcoins at the cost of several hundred billion dollars. When Trump made his own promise of a national bitcoin stockpile in his address the following day, it seemed like a hasty edit aimed at keeping pace with his then-rival [I63]. But even then, Trump’s promise was much more modest than RFK’s, only incorporating existing government bitcoin and no new purchases.

Even if the bitcoin reserve didn’t begin as a strong priority of Trump’s, it quickly became a top entry on his crypto benefactors’ wishlist. And the two different visions — RFK’s massive government buying spree versus Trump’s rebranding of the pile of assets already under the government’s control — helps explain both the current policy and its mixed reception. Even after RFK withdrew his candidacy and joined forces with Trump, many crypto traders continued to imagine a future of massive government bitcoin purchases. This helped drive bitcoin prices into six digits when Trump was elected, as speculators positioned themselves to profit from an expected government buying spree that still hasn’t materialized.

What’s the reaction?

Trump's executive order has caused rifts in previously faithful support from the crypto sector, and some of the most telling criticism has come from unexpected sources. To their credit, some vocal Trump supporters like bitcoin venture capitalist Nic Carter have pointed out the fundamental contradiction in bitcoin advocates now embracing government intervention: “I wonder what early libertarian Bitcoiners from 2012–16 would think of 2025 Bitcoiners pushing for the government to backstop the value of their coins,” Carter wrote in a CoinDesk op-ed. He went further, acknowledging that “To Trump’s critics, this appears corrupt. It also makes the remainder of Trump’s pro-crypto policymaking and regulatory efforts look self-interested, rather than letting it stand on its own as good policy.”³

The establishment of an altcoin stockpile has also ruffled the feathers of bitcoin maximalists, who feel bitcoin is the superior cryptocurrency. “I have nothing against XRP, SOL, or ADA but I do not think they are suitable for a Strategic Reserve. Only one digital asset in the world right now meets the bar and that digital asset is bitcoin,” argued Gemini's Tyler Winklevoss on Twitter⁴ — perhaps unsurprisingly, given that he and his twin brother hold an estimated 70,000 BTC.⁵

The starkest disappointment came from those who had been betting on massive government purchases of bitcoin. “No active buying means this is just a fancy title for Bitcoin holdings that already existed with the Govt. This is a pig in lipstick,” wrote bitcoin hedge fund manager Charles Edwards,⁶ reflecting broader market disappointment that drove crypto prices lower following the announcement.

Still, powerful voices in the crypto world are celebrating. “I’ve heard from bitcoin whales from all over the world tonight. Absolute jubilation. The admin nailed it,” declared David Bailey, the creator of the Bitcoin conference.⁷

Even Carter eventually moderated his criticism after learning the reserve would consist only of seized assets, writing that it “couldn't have gone better.”⁸ But the celebration of a reserve built in part from civil asset forfeiture represents yet another astonishing ideological shift: the same crypto advocates who have long railed against government overreach and championed financial sovereignty are now applauding the transformation of seized assets taken through controversial civil forfeiture proceedings that don't require criminal convictions⁹ into a permanent government stockpile.

And some members of Congress agree with the bitcoiners who think the government isn’t doing enough to pump their bags. Senator Cynthia Lummis is still pushing for her BITCOIN Act, which would see the government purchasing 1 million BTC over five years (at a cost of $80–$100 billion at recent bitcoin prices). Lummis personally holds a substantial amount of bitcoin. Three of her five new co-sponsors¹⁰ accepted crypto industry funding: Bernie Moreno ($40 million, R-OH), Jim Justice ($3 million, R-WV), and Marsha Blackburn ($23,100, R-TN).

Perhaps most telling is the reaction beyond the crypto bubble: while bitcoin whales celebrate, the vast majority of Americans — who don't own crypto — have responded with a mix of bewilderment and outrage at what appears to be a government policy crafted solely to benefit a small group of wealthy speculators and crypto companies.

I have disclosures for my work and writing pertaining to cryptocurrencies.