For the first edition of WWDT in 2025, I decided to look at the concept of a strategic bitcoin reserve and how it compares to other government strategic reserve programs.
The concept of a government-sponsored Bitcoin reserve represents a significant departure from traditional strategic reserves yet shares some fundamental similarities with existing programs like the Strategic Petroleum Reserve (SPR) and the United States Bullion Depository.
The Bitcoin Reserve Bill
For those who are not aware, Senator Cynthia Loomis (R-WY) introduced S.4912 in the Senate on July 31, 2024[1]. The bill calls for the establishment of a Strategic Bitcoin Reserve to be administered by the Treasury Department.
Specifically, the bill directs the Treasury to establish a program that shall:
● Purchase not more than 200,000 bitcoins per year over a 5-year period, for a total acquisition of 1,000,000 bitcoins.
● Conduct the purchases in a transparent and strategic manner.
● Hold bitcoin acquired in trust for the United States for a period not less than 20 years.
● Not dispose of the bitcoin prior to the minimum holding period for any purpose other than retiring outstanding Federal debt instruments.
● Upon expiration of the holding period, not sell more than 10% of the assets held in trust during any 2-year period.
● Establish and maintain a decentralized network of secure storage facilities distributed across the US, for the cold storage of Government bitcoin holdings.
This plan has found support recently with the incoming administration, as President Donald Trump has touted it as a quick way for the US to gain ground and compete with other countries in crypto[2].
Given the potential ramifications of this proposal (and the fact that anything to do with crypto automatically becomes a lightning rod and talking point), numerous academics and government officials have jumped into the discussion (both for and against) to offer their opinions on whether it’s 1) legal and 2) needed.
But before diving into Bitcoin, let’s look at how the US government maintains strategic reserves of other assets.
The Strategic Petroleum Reserve
The US Strategic Petroleum Reserve (SPR) was included in the Energy and Conservation Act and was approved by Congress and President Ford in 1975. It was initiated in direct response to the OPEC oil embargo of 1973, to ensure the nation had adequate reserves of petroleum in times of crisis. The SPR consists of a stockpile (up to 727 million gallons) of crude oil held in four secure locations along the US Gulf Coast [3].
The SPR can be utilized in three ways: a full drawdown, a limited drawdown, or a drawdown for a test sale/exchange. A sitting president can authorize a full or limited drawdown, but only Congress can initiate replenishment by authorizing the funds necessary to purchase the oil.
Once a drawdown is authorized, the Energy Department conducts the sale at market prices to authorized bidders, although with limited drawdowns the aggregate amount of oil sold cannot exceed 30 million barrels or 5 million barrels per day[4].
According to a study done by Resources for the Future, just the presidential announcement of a drawdown of the SPR is usually enough to tip energy markets bearish[5], and may stabilize markets by reducing backwardation[6].
While controversial[7], even without getting into the geopolitics of dollar-based crude oil pricing, the SPR has been functioning consistently since its inception 50 years ago. The SPR has generally proven popular with politicians on both sides of the aisle, and in my opinion, this likely will continue for the foreseeable future.
Gold Reserves
Although it’s seldom in the news, the Treasury Department currently holds over 245 million fine troy ounces of gold in deep storage at facilities in Denver, Fort Knox, and West Point. The Federal Reserve holds an additional 13 million ounces in the New York Fed[8].
The government has held on to this gold since moving off the gold standard in 1933[9] and disallowing dollar conversions to gold in 1971[10]. While there is no concrete government policy in place that would trigger the use or sale of this gold, gold bugs will argue that it serves as a store of national wealth and provides economic security during times of crisis.
Unlike the SPR, the US government does not typically transact with gold. In fact, the last time the Treasury auctioned off any gold was 1978[11]. As of 2024, the US had over two and a half times the gold reserves of Germany, and three times as much as China (although central banks are generally coy about reporting their actual reserves)[12].
The Gold Reserve Act of 1934 transferred ownership of the US government’s gold from the Federal Reserve to the US Treasury Department. In return, the Federal Reserve received gold certificates at a statutory price of $42.22 per ounce, which is what the Treasury still uses to determine the book value of its gold today[13]. So, even though the US Treasury lists the book value of its gold at ~$11 billion, it’s really sitting on ~$585 billion worth of gold at average 2024 prices of ~$2400/per ounce. I find it a bit curious that the US holds so much of an asset that Warren Buffett has never said a good thing about[14].
Precedent
Bitcoin has been around for over 15 years, and it has had listed futures contracts in the United States trading around the asset for over seven years. Whether or not you believe in the asset as a store of value, a commodity, or something else, institutions, governments, and individuals all have significant stakes in the product today, and that interest, at least in my opinion, does not seem like it is going to abate anytime soon.
In terms of precedent, the US government has managed strategic reserves of other commodities and products and will continue to do so as long as the public wills it.
Here are some current and former strategic stockpiles held and managed by the US government:
● The Bill Emerson Humanitarian Trust[15] (previously the Food Security Commodity Reserve) – has the potential to hold 4 million metric tons of wheat, corn, sorghum, and rice. This is the fourth iteration of a strategic grain reserve managed by the USDA.
● The Northeast Home Heating Reserve – a 1-million-barrel reserve of heating oil located in four areas of the northeast US and administered by the Department of Energy.[16]
● The National Stockpile – a physical reserve of definite quantities of materials and commodities deemed essential to national security and overseen by the Defense Logistics Agency[17].
● The Federal Helium System[18] – was managed by the Bureau of Land Management and constituted a federal helium reserve until it was drawn down permanently in 2021.
So yes, there is precedent for the US government to create and manage a strategic bitcoin reserve.
The Logistics
In an interesting twist, Senator Loomis’s bill calls for acquiring 200,000 bitcoins per year, which is almost the exact amount of bitcoin the US government currently has in its wallets today[19]. Essentially, the bill calls for purchasing 200,000 bitcoins per year for four years, which at today’s prices would cost ~$18 billion per year.
This is an enormous amount of money, but from the perspective of US government spending, it is roughly one aircraft carrier per year for four years[20]. (In case you’re wondering, the US Navy is currently required by law to have 11 aircraft carriers in active duty[21], so Elon Musk isn’t going to be cutting that expense anytime soon.) $18 billion per year is also less than .06% of current US treasury issuance, which last year hit $29 trillion[22].
To make this stake more palatable to the public, the US could draw down Treasury gold reserves (the last US gold sale was almost 50 years ago for Chris sakes!) by the required amount each year and use the proceeds to fund the bitcoin strategic reserve. Even with the sale of roughly $100 billion in gold, the US reserves will still be twice as large as Germany’s and more than adequate to still occupy the staff at Fort Knox.
And for those who argue that bitcoin could go to zero, I would like to remind everyone that for a brief time oil traded below zero (down to $-37.62/barrel[23]) and I posit that the SPR actually helped stabilize the price of WTI during that period.
Of course, the US government could just create an unofficial strategic reserve by not auctioning off the bitcoin they currently have and will accumulate in the future. But this will effectively make government-owned bitcoin a political beachball, with each change of government creating a will they/won’t they draw down the surplus on a whim, and in the process could create even more volatility around the asset in the future.
In Summary
Can the US create a Strategic Bitcoin Reserve? Yes.
Should the US create a Strategic Bitcoin Reserve – not for me to say, but the precedent is there, and the cost (as compared to other government initiatives) is manageable. If the incoming administration pushes this agenda item, I foresee buckets of ink being spilled, hours of analysis being taped, and endless minutes of congressional grandstanding.
[1] https://www.congress.gov/bill/118th-congress/senate-bill/4912
[3] https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_%28United_States%29#cite_note-3
[4] https://www.energy.gov/ceser/spr-faqs
[7] https://www.ipaa.org/why-draining-americas-strategic-petroleum-reserve-is-wrong/?t
[8] https://www.fiscal.treasury.gov/reports-statements/gold-report/21-02.html
[12] https://www.gold.org/goldhub/data/gold-reserves-by-country?t
[13] https://www.fiscal.treasury.gov/reports-statements/gold-report/21-02.html
[14] https://www.nasdaq.com/articles/3-things-warren-buffett-has-said-about-gold-updated-2024
[15] https://en.wikipedia.org/wiki/Bill_Emerson_Humanitarian_Trust
[16] https://www.energy.gov/ceser/northeast-home-heating-oil-reserve
[17] https://www.dla.mil/Strategic-Materials/About/OurOffices/
[18] https://www.blm.gov/press-release/blm-announces-disposal-process-federal-helium-system
[19] https://bitcointreasuries.net/
[20] https://en.wikipedia.org/wiki/USS_Gerald_R._Ford
[22] https://www.sifma.org/resources/research/statistics/us-treasury-securities-statistics/