Is it Possible for the US to Strategically Reserve Bitcoin? If So, What Would the Procedure Be?

"Proposal to Create Purchase Funds with Federal Reserve Deposits and Gold Holding Profits"

Option to Use Exchange Stabilization Fund via Executive Order for Purchases

Difficulties in Issuing Bonds or Transferring Seized Assets to Buy Bitcoin

Could the United States strategically reserve Bitcoin? With President-elect Trump mentioning Bitcoin surpassing $107,000, attention is drawn to whether this is realistically possible.

On the 17th (local time), Bitcoin (BTCUSD) is trading at $107,351 in the US market.

The US Strategic Reserve is a system for stockpiling critical resources that can be released during crises or supply disruptions. The most well-known example is the US Strategic Petroleum Reserve (SPR), the world's largest emergency crude oil supply. It was created in 1975 following the Arab oil embargo of 1973-74.

The US utilizes its oil reserves during wartime or when hurricanes disrupt oil infrastructure, causing market instability.

Canada is the only country in the world with a strategic reserve of maple syrup. China strategically reserves various metals, grains, and pork.

If the US decides to strategically reserve Bitcoin, how would the procedure work?

Opinions from analysts and legal experts cited by Reuters are divided on whether Trump can create a reserve with his executive power or if congressional action is needed. Some argue that Trump could use an executive order to utilize the US Treasury's Exchange Stabilization Fund to create a Bitcoin reserve. This would allow the fund to be used to purchase Bitcoin instead of foreign currency.

According to BitcoinTreasury.net, the US government currently holds about 200,000 Bitcoins, worth approximately $21 billion at current prices. All of these were seized from criminals by the US government.

In a July speech, Trump unveiled a Bitcoin reserve plan, suggesting that 200,000 could be the starting point. However, transferring seized assets held by the Department of Justice to reserves does not seem feasible under current regulations.

Trump has not mentioned the US government buying Bitcoin on the open market for strategic reserves. To buy on the open market, the US government might need to issue more bonds, but considering the already severe US fiscal deficit, this also seems unrealistic.

Some proponents of Bitcoin reserves argue that the US could sell some of its gold reserves and use the proceeds to buy Bitcoin. This would mean selling gold to buy Bitcoin.

The most concrete Bitcoin reserve proposal in the US Congress comes from pro-crypto Republican Senator Cynthia Lummis. Last month, she proposed a bill for a reserve fund operated by the US Treasury in an interview with CNBC, but it has not gained support.

The bill proposes a program for the Treasury to purchase 200,000 Bitcoins annually for five years until reaching 1 million. This would account for about 5% of the total global Bitcoin supply of approximately 21 million. The plan is to fund purchases with profits from Federal Reserve Bank deposits and gold holdings. The Bitcoin reserves would then be maintained for at least 20 years.

Regarding the benefits of reserving Bitcoin, Trump mentioned in his July speech that "it would help the US dominate the global Bitcoin market over China."

Other supporters argue that reserving Bitcoin, which is likely to increase in value over the long term, could allow the US to reduce deficits or strengthen the US dollar without raising taxes.

There are also risks associated with strategic reserves.

Cryptocurrency skeptics point out that unlike most other commodities, Bitcoin has no intrinsic use and is not essential to the functioning of the US economy.

Created in 2008, Bitcoin lacks historical precedent as an asset to assume long-term value appreciation and is highly volatile. There are also claims that crypto wallets are excessively vulnerable to cyberattacks. Additionally, unlike oil, the US government's buying or selling itself could cause enormous volatility and impact Bitcoin prices, limiting government movements in the open market, which is cited as a factor offsetting the benefits of reserves.

Guest Reporter Kim Jung-ah kja@hankyung.com