Would the plan enrich bitcoin holders, or put the U.S. economy on a sounder footing?
When Dennis Porter co-founded the nonprofit Satoshi Action Fund in 2022 and started advocating for a national bitcoin reserve, the idea that the United States might soon be stockpiling bitcoin appeared remote. The cryptocurrency exchange FTX was headed for bankruptcy and the Biden administration seemed outright hostile to digital assets.
But Porter, who had previously worked in politics on the local and state level in Oregon, kept pushing the idea. He immersed himself in the online social networks that connect crypto enthusiasts, where he had also met Mandy Gunasekara - the co-founder of his nonprofit who served as chief of staff at the Environmental Protection Agency in the first Trump administration. They rounded out their team by hiring Eric Peterson, a veteran policy analyst for conservative groups like Americans for Prosperity, to serve as Satoshi Action Fund's policy director.
"Just as an individual should own bitcoin to protect their purchasing power in the future, we also believe that the states and federal government should do that as well," said Porter, who has helped popularize the idea as much as anyone.
Porter is now seeing the culmination of years of hard work and his single-minded dedication to the idea that bitcoin (BTCUSD) can serve as a national strategic asset.
Bitcoin prices have pulled back this week after a weekslong rally driven by hopes that a Trump administration will enact crypto-friendly policies. Nothing has bitcoin traders more bullish than speculation that the U.S. Treasury might make outright purchases in an effort to create a "strategic bitcoin reserve."
The notion of a federal bitcoin reserve would have seemed absurd just months ago, particularly to crypto purists who view the digital currency as a bulwark against government control. Yet this once-fringe idea has gained serious political momentum, with Trump among its prominent supporters, leading some analysts to view potential government purchases as a watershed moment for cryptocurrency markets.
A presidential endorsement
Trump first endorsed the idea of a bitcoin reserve during a speech at a bitcoin conference in Nashville, Tenn., in July. When Trump showed up on the floor of the New York Stock Exchange earlier this month, CNBC's Jim Cramer asked him if he wanted to create a strategic cryptocurrency reserve that mirrored the federal government's stockpiling of petroleum. "I think so," Trump responded. "We are going to do something great with crypto."
Porter said that Trump's support has been a catalyst for other politicians to adopt the idea, but that the most important development was the November election results, where politicians who appeared pro-crypto had an advantage over digital-asset skeptics.
"The election was a clear signal that politicians need to start paying attention to bitcoin," he said. "A lot of people care about this, and they're going to fight for it, and win. That's what led to this really big outpouring of interest in the strategic bitcoin reserve."
Porter granted that the idea may come under criticism for appearing to line the pockets of current bitcoin holders, and that a strategic bitcoin reserve would be extremely bullish for the asset.
But he argued this is no different than many government programs.
"The government owns gold and that helps out gold holders, and the government buys oil, helping out oil companies," he said.
The Trump transition team didn't respond to requests for comment.
The movement catches fire
The idea that the government should stockpile bitcoin even has some bipartisan support.
Democratic Rep. Ro Khanna of California believes the U.S. would benefit from a bitcoin reserve, and has advocated for the U.S. holding on to bitcoin it has seized from criminals, rather than the typical practice of selling them.
"Bitcoin that has been seized by the U.S. government should not be sold for a specified duration, and made part of our reserves," Khanna told MarketWatch.
Sen. Cynthia Lummis, a Wyoming Republican, has been Capitol Hill's most aggressive proponent of a bitcoin strategic reserve. She introduced a bill over the summer that would have the U.S. purchase 1 million bitcoin over five years.
"For years, my generation has spent federal funds with reckless abandon, amassing an insurmountable $36 trillion in national debt with no clear end in sight," Lummis said in a statement to MarketWatch.
"We owe it to future generations to take bold and substantive action to address our debt crisis, and creating a strategic bitcoin reserve gives us the best chance at paying down nearly half of our national debt in the next 20 years with existing resources, with the added bonus of securing America's position as the world leader in financial innovation for the 21st century."
Porter of the Satoshi Action Fund has also had success bringing the idea to the state level. Just last week the chairman of the Texas House financial committee introduced a bill establishing a bitcoin reserve for his state, and similar legislation has been introduced in Pennsylvania and Ohio.
Out with the gold, in with the new
Lummis's idea for financing the bitcoin purchases relies in part on the massive stockpile of gold (GC00) the U.S. owns as a legacy from the days when the U.S. dollar was backed by the precious metal, and when dollar holders could exchange their currency for gold at a fixed price.
Dollars haven't been convertible for gold since the early 1970s, but the Treasury and Federal Reserve still own roughly 8,100 metric tons of gold.
The government values that gold at $42 per ounce, well below the current market price of $2,650.
Lummis wants the Treasury to revalue that gold at the current market price, and use the paper profit to finance bitcoin purchases without having to raise taxes or issue new Treasury debt.
Critics say, however, that this operation wouldn't be a free lunch, and would require Federal Reserve banks to use some combination of money printing and asset sales to pay the Treasury the difference between the current price of their gold certificates and their new valuation.
Monetary economist George Selgin argued in a recent newsletter that this operation would amount to "backdoor borrowing," by the government.
In order to avoid new debt and to "skip past the ordinary appropriations process, and to otherwise pull the wool over Americans' eyes, that the [Lummis bill] relies on so much gold-plated hocus pocus," Selgin wrote.
"What better way to gain the public's support for a plan that may only serve to pump bitcoin holders' bags than by making it look like it won't cost a thing?"
Bitcoin purists appalled
Bitcoin was conceived as a technology that would free its users of interference and surveillance by powerful institutions like the government and banks.
Some bitcoin purists devoted to that initial vision are not too happy with calls for the government to own a large portion of the total supply.
Mark Goodwin, editor and chief of Bitcoin Magazine, said on X that he "will never be able to properly express how deeply sad this whole stunt makes me."
He argued that the reserve would ultimately hinder bitcoin's development as a currency and reinforce the power of the American-led global financial system.
Catherine Austin Fitts, a former investment banker and assistant secretary for the Department of Housing and Urban Development, argued in a November blog post that the strategic bitcoin reserve idea has been pushed by so-called bitcoin billionaires to create a wealthy buyer for their holdings.
"Bitcoin started as a digital payment system that had the potential to grow into a powerful decentralized network and community that offered significant utility and could indeed revolutionize money," she wrote.
Fitts lamented that bitcoin has instead turned into a "pump-and-dump financial product," with the federal government now targeted as the ultimate mark.
Porter remains unfazed. "These criticisms are water off my back," he said, adding that he has long received flak from purists who argued that bitcoiners shouldn't engage in politics at all, an argument he believes has been discredited.
"I've been proven right quite a number of times on the way we should do these things," he said. "At the end of the day bitcoin is too important to give up the fight."