Even if Trump were to limit the reserve to bitcoins seized through law enforcement activity, his administration must also weigh the opportunity cost associated with holding bitcoin. While some assets (such as bonds) generate a steady stream of income for their holders, bitcoin does not, making it expensive to hold.
“The question comes down to what the government would get out of the bitcoin reserves it would have,” says George Selgin, director emeritus of the Center for Monetary and Financial Alternatives at the Cato Institute, a US think tank that promotes libertarian principles. The US government has previously periodically auctions bitcoin confiscated through law enforcement activity. But by choosing to keep the bitcoins you own, “you’re not taking advantage of the market value, which you could put to many other uses, from paying off federal debt to paying for other government programs,” Selgin says.
While Selgin is a proponent of Bitcoin for its independence from state control, he objects to the U.S. government speculating on its price on behalf of citizens. “Governments are not particularly astute investors,” Selgin says. “Having the government act on behalf of citizens as some kind of investment trust or mutual fund doesn’t make a lot of sense.”
During his speech in Nashville, Trump mentioned a number of high-profile bitcoiners, including Cameron and Tyler Winklevoss, who founded the cryptocurrency trading platform Gemini, and thanked them for their guidance. Afterwards, Tyler led to X to celebrate Trump’s plan and congratulate the conference organizer for having “given the orange pill” to the former president.
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, particularly if the government were to expand its existing holdings, says Michael Green, chief strategist at asset management firm Simplify.
“The only possible way for the U.S. government to buy bitcoin is from existing holders,” Green says. “But if the government uses tax revenue (or issues bonds) to buy bitcoin, it creates a situation where the taxpayer is subsidizing an extraordinarily small subset. Ultimately, we’re talking about creating exit liquidity for a small subset of the population.” It would be like the U.S. government promising to overpay for real estate in California, Green says, but in no other state. “This is not materially different,” he says.
The larger the government’s bitcoin pool, the more beholden it will be to those who maintain the underlying network — the bitcoin mining companies — whose job it is to process transactions and protect the network from attack. In effect, the bitcoin mining industry would become “another special interest group,” Green says, “that the U.S. government would have to step in and bail out” if the industry — notorious for its sensitivity to factors beyond its control — faltered.
Neither Trump nor Lummis responded to a request for comment on the criticism leveled at the bitcoin storage plan.
Another question is whether Trump intends to carry out the plan to create an arsenal of bitcoins. “Trump is a master of demagoguery, appealing to the emotions of the crowd. It is pure election campaigning,” says Angel. “I think the plan will probably go the same way as Trump Airline, Trump Casino and Trump University.” That is, it will go nowhere.