Even if President Trump were to limit the reserve to bitcoin seized through law enforcement operations, the administration would also have to consider the opportunity cost of holding bitcoin: While some assets, such as bonds, provide holders with a steady income, bitcoin does not, making it expensive to hold.
“The question is, what will the government get out of this massive amount of bitcoin it has,” said George Selgin, director emeritus of the Center for Monetary and Financial Alternatives at the Cato Institute, a US think tank that promotes libertarian principles. In the past, the US government has periodically auctioned bitcoin seized through law enforcement operations. But by choosing to hold onto its bitcoin holdings, Selgin said, “the government is not realizing market value, which could be used for a variety of purposes, from reducing the federal debt to paying for other government programs.”
Selgin supports bitcoin because of its independence from state control, but he’s against the U.S. government speculating on its price on behalf of its citizens. “Governments are not particularly smart investors,” Selgin said. “It doesn’t make much sense for governments to act like mutual funds or mutual funds on behalf of their citizens.”
During his speech in Nashville, Trump listed Bitcoin advocates by name, thanking them for their guidance, including Cameron and Tyler Winklevoss, founders of cryptocurrency trading platform Gemini. Tyler then appeared on X to praise Trump’s plan and congratulate the conference organizers for getting the former president to take the “orange pill.”
But while popular among large bitcoin holders and industry executives, the ambition to establish a bitcoin reserve could come at a cost to almost everyone else, including if governments were to expand their existing holdings, said Michael Green, chief strategist at asset management firm Simplify.
“The only way the US government can buy bitcoin is from existing holders,” Green says. “But if the government buys it with tax revenues (or by issuing bonds), then you’re creating a situation where taxpayers are subsidizing a very small group of people. You’re essentially giving exit liquidity to a very small portion of the population.” Green says this is the same as the US government promising to pay exorbitant amounts for properties in California but not other states. “It’s not materially different,” he says.
Meanwhile, the more bitcoin the government holds, the more dependent it becomes on the bitcoin mining companies that maintain the underlying network, processing transactions and protecting it from attacks. In effect, the bitcoin mining industry “becomes another special interest group that the U.S. government has to step in and bail out if an industry that’s notoriously sensitive to factors outside its control falters,” Green said.
Neither Trump nor Lummis responded to requests for comment on the criticism of the Bitcoin stockpile plan.
Whether Trump intends to go ahead with his Bitcoin stockpile plan is another matter. “Trump is a master of mass emotional demagoguery. This is pure campaign tactics,” Angel said. “This plan will probably go the same way as Trump Airlines, Trump Casino and Trump University,” which means it’s not going anywhere.
