As President-elect Donald Trump prepares to take office in 2025, the cryptocurrency market hoped that a strategic Bitcoin BTC/USD reserve would take wings and eventually be implemented.
Recent developments evoke optimism, with Trump reportedly planning an executive order to create a national stockpile. He also promised to “do something great with crypto,” when queried about a strategic reserve consisting of the leading cryptocurrency.
However, speculation over the shape and structure of the prospective reserve has been increasing. The Federal Reserve stated last week that it was not permitted to acquire Bitcoin and was not looking for a law change.
Some experts Benzinga spoke with believed the most likely way to regulate and hold Bitcoin would be to use the law proposed by Sen. Cynthia Lummis (R-Wy.).
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Cynthia Lummis’ Proposal The Most Ideal?
Todd Ruoff, CEO of decentralized physical infrastructure firm Autonomys, said, "Senator Cynthia Lummis' proposal outlines a deliberate plan for expanding this stockpile over time, but its final shape will depend on political dynamics and economic conditions."
The proposed legislation, also called the BITCOIN Act, advocates the purchase of 1 million Bitcoins over five years by the Treasury Department, with no selling or auctioning for a minimum of 20 years.
Ruoff opined that over time alternatives such as collaborative models with private entities or decentralized custody could also be considered.
Gold Certificates Or Exchange Stabilization Fund?
The U.S. government holds 198,109 Bitcoins in asset forfeiture funds, according to analytics firm Arkham Intelligence. Lummis' bill pushes for leveraging gold certificates, held at the Federal Reserve’s 12 banks, to fund future acquisitions.
However, Johnny Gabriele, Head Analyst of Blockchain Economics and AI Integration at The Lifted Initiative, bet against this possibility.
"While the selling of gold certificates has been proposed, I do not see a world where the broader American public can tolerate that just yet. So I don't see that realistically being an option. Using the [exchange] stabilization fund would be a much more palatable way of acquiring new Bitcoin," Gabriele added.
Ruoff differed on this, arguing that the proposal to buy Bitcoin by revaluing gold certificates was "more developed and concrete."
"Due to Bitcoin’s high volatility, the exchange stabilization method may lead to large losses, affecting the fund’s ability to fulfill its primary purpose of stabilizing currency markets," Ruoff said, on the question of using the emergency reserve stockpile to buy Bitcoin.
He added that Bitcoin purchases might come off as conflicting with ESF's traditional role in stabilizing the dollar, possibly raising questions about its credibility.
Interestingly, Trump, who built his pro-cryptocurrency campaign on firmly lobbying for a Bitcoin reserve, spoke more about HODLing the existing stash than promising to buy more Bitcoin.
Bitcoin’s Volatility: A Big Consideration
Alexandr Sharilov, CEO of cryptocurrency market analytics platform CoinDataFlow, broadly agreed with some of these views, especially, that of using the legislation proposed by Lummis. However, he underscored the bigger issue at hand.
"The main problem with Bitcoin as a strategic reserve is that it is difficult to balance its potential with short-term risks," he said, drawing attention to the volatile nature of the asset. "This process requires not only legislative changes, but also a detailed analysis of how digital assets will affect national economic policies."
Sharilov also talked about the pitfalls of equating Bitcoin with gold as a reserve asset, arguing that the leading cryptocurrency was far more volatile than the yellow metal.
Price Action: At the time of writing, Bitcoin was exchanging hands at $95,496.79, down 2.75% in the last 24 hours, according to data from Benzinga Pro.
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