The expectations of a U.S. strategic Bitcoin (CRYPTO: BTC) reserve have skyrocketed following Donald Trump's presidential victory, with the cryptocurrency sector firmly behind the ambitious idea.
Trump called for a strategic national Bitcoin stockpile at a conference earlier this year, while also advocating against selling state-owned Bitcoin stash.
While nothing concrete has come from Trump since this advocacy, his Republican colleagues, especially Sen. Cynthia Lummis (R-Wy.), have proposed legislation, called the BITCOIN Act, to purchase one million Bitcoins over five years.
Individuals connected to the digital assets industry have given a thumbs up to the idea.
The For And Against Debate
Joe McCann, founder and CEO of cryptocurrency hedge fund Asymmetric, told Benzinga that the move could position the U.S. as a "leader in crypto."
McCann said that if the reserve gains more buzz and moves closer to reality, it's likely to spur Bitcoin's increase significantly.
"The market is already somewhat anticipating the potential impact, but I don't think a lot of people have "priced in" the idea that if this were to actually pass [BITCOIN Act], other countries would also want to acquire a percentage of the total Bitcoin supply for their reserves, driving even more demand."
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However, critics like Peter Schiff have slammed the idea, predicting that such a move would end in the dollar’s devaluation and hyperinflation, as the government would have to print more money to buy more Bitcoin.
In defense, Lummis has maintained that the government won't have to spend "any new dollars" to fund the purchases. Instead, it could use the Federal Reserve-held gold certificates, currently valued at 1970s prices, update them to the fair market value, and then sell them to buy Bitcoin.
Will Your Bitcoin Holdings Be At Risk?
Another lesser-talked-about aspect of a potential reserve is whether it'd give the federal government supreme authority on holding Bitcoin, given the asset's limited supply. And whether, in an emergency situation, the government would enact something similar to Franklin D. Roosevelt’s Executive Order 6102 of 1933, which required Americans to surrender a large portion of their gold holdings to the Federal Reserve.
"Bitcoin is an entirely different animal from gold. It is not tied to our monetary system like gold was in 1930," Neil Bergquist, CEO of Seattle-headquartered cryptocurrency exchange Coinme, said.
"Seizing an individual’s Bitcoin would be a logistically and legally complex operation since it is on a decentralized blockchain, and such confiscation actions would likely be determined illegal," he argued.
Denis Sklyarov, CEO and co-founder of decentralized physical infrastructure company WiFi Map, also agreed with the view that Bitcoin's digital, decentralized nature would make such an endeavor as difficult.
"Additionally, legal and cultural shifts in the U.S. over the past century emphasize financial freedom and personal property rights, making such a sweeping confiscation almost impossible under current laws," he added.
McCann took a middle ground, saying that the government would encourage people to sell Bitcoin voluntarily rather than forcing them to surrender.
"If the U.S. were to establish a strategic Bitcoin Reserve, it might use tax breaks or premium buy-back programs as carrots instead of sticks," he remarked.
Bettors on the popular prediction market platform Polymarket priced in a 29% possibility of Trump creating a Bitcoin reserve in the first 100 days of his presidency as of this writing.
Price Action: At the time of writing, Bitcoin was exchanging hands at $96,474.28, down 0.29% in the last 24 hours, according to data from Benzinga Pro.
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