#BTC is a strategic bitcoin reserve and is a government-controlled bitcoin holding aimed at hedging against inflation, diversifying reserves, and enhancing financial security, but it involves risks such as volatility, regulatory uncertainty, and security vulnerabilities.
The United States is leading efforts to formalize the digital currency reserve through seized assets, direct purchases, and mining, while Switzerland, the European Union, and other countries remain skeptical due to stability and monetary policy risks.
What is the strategic bitcoin reserve?
A strategic bitcoin reserve (SBR) is a reserve of bitcoin held by the government used to enhance financial security and hedge against inflation. Unlike a gold or oil reserve, it is a managed digital asset reserve aimed at preserving national wealth and countering monetary instability.
This concept originated in the United States in July 2024, when Senator Cynthia Lummis introduced the Bitcoin Act to authorize the U.S. Treasury to accumulate bitcoin as a strategic asset. In January 2025, President Donald Trump signed an executive order directing federal agencies to explore bitcoin acquisition operations.
On March 2, 2025, President Trump officially announced the creation of a U.S. strategic reserve for digital currencies, which will include bitcoin, ethereum, ripple, solana, and cardano. This marks the first time any administration has confirmed a strategic active reserve for digital currencies rather than a passive stockpile.
How will the U.S. strategic bitcoin reserve work?
The U.S. bitcoin reserve will be a federally managed collection of bitcoin and selected digital currencies, integrated into a broader strategic digital currency reserve. The reserve will initially include BTC, ETH, XRP, SOL, and ADA, with the possibility of adding other U.S. currencies marked as "Made in America."
Key aspects of operating the reserve include:
• Seized cryptocurrency holdings: The U.S. government holds over 210,000 bitcoins from confiscated criminal assets. Instead of auctioning these assets, they will be permanently allocated to reserves.
• Expansion beyond bitcoin: Other U.S. blockchain chains, such as Algorand, Stellar, and Avalanche, could be included to support local innovation, in addition to ethereum, solana, ripple, and cardano.
• Direct market purchases: The Treasury Department will follow the Loomis Reserve plan for bitcoin to gradually acquire up to one million bitcoins over several years, using surplus funds to minimize market disruption.
• Bitcoin mining integration: The energy policy pursued by the U.S. administration supports local mining, with plans to direct bitcoin mined from federally supported projects to the reserve.
• Stablecoin liquidity: The Federal Reserve may evaluate adding stablecoins like USDT from Tether as an indirect way to purchase U.S. Treasury bonds.
• Regulatory oversight and security: The reserve will be managed by the Treasury Department and the Federal Reserve, with cold storage protocols and multi-signature security.
Explaining the role of bitcoin reserves at the state level
Before the U.S. federal government officially established its strategic bitcoin reserve, several states moved forward with their own bitcoin investment strategies. Some have already created reserves, while others are in the process of enacting legislation to integrate bitcoin into state treasuries.
Below are seven states leading the bitcoin reserve race:
• Texas: Proposed the creation of a strategic bitcoin reserve, leveraging the mining industry and exploring integration with its gold depository system.
• Utah: House Bill 230 passed the House vote and is under review in the Senate, which could make Utah one of the first states with a regulated bitcoin reserve.
• Arizona: SB1025 (Arizona Strategic Bitcoin Reserve Act) will allow up to 10% of state funds to be allocated to bitcoin investments.
• Florida: SB550 proposes bitcoin as part of state reserves and pension funds, aligning with its broader pro-crypto stance.
• Missouri: SB614 seeks to license bitcoin investments for the state treasurer, positioning Missouri among the early adopters of this currency.
• Ohio: Two legislative proposals, SB57 (Ohio Bitcoin Reserve Act) and HB18 (Digital Currency Strategic Reserve Act), propose a structured state investment in bitcoin.
• New Hampshire: Proposed legislation to create a state-managed bitcoin reserve, enhancing its reputation as a crypto-friendly state under the slogan "Live Free or Die."
State governments have handled bitcoin reserves in various ways, with 7 states effectively holding bitcoin reserves, 2 states implementing partial reserves, 19 states considering legislation, and 5 states rejecting the idea. This will serve as a test of how bitcoin reserves operate at the state level.
What are the benefits of a bitcoin reserve?
The strategic bitcoin reserve could enhance the nation's financial strength by adding a valuable decentralized asset to government holdings. Long-term bitcoin growth could help reduce national debt, a strategy Senator Cynthia Lummis claims could halve U.S. debt over the next twenty years.
The bitcoin reserve also provides geopolitical leverage, allowing governments to counter economic threats and maintain their influence in global finance. President Donald Trump viewed bitcoin as a means to offset China's growing dominance in digital currencies while enhancing the dollar's role in international trade.
Furthermore, integrating digital currencies into state reserves accelerates financial innovation and enhances the state's standing in the digital economy. Government adoption of bitcoin could legitimize digital currency markets, attract investments, and support broader adoption of blockchain-based financial infrastructure.
What are the risks?
The strategic bitcoin reserve comes with financial, regulatory, and security risks that could undermine its effectiveness. While bitcoin offers potential long-term gains, its volatility and structural uncertainties pose challenges for national reserves.
Key risks include:
• Extreme price volatility: Bitcoin has a history of severe crashes, with losses exceeding 80% in months, making its value unpredictable for government reserves.
• Regulatory uncertainty: Changing laws and unclear policies regarding taxes and international compliance may affect the legal status of bitcoin and its usability.
• Security vulnerabilities: Bitcoin reserves are digital and exposed to the risk of cyberattacks, breaches, and insider fraud, requiring strict custody and security measures.
• Lack of asset-backed stability: The value of bitcoin is speculative and disconnected from physical reserves, making it susceptible to market sentiment and liquidity crises.
• Impact on monetary policy: Holding bitcoin may disrupt central bank strategies, making it more difficult to control inflation and maintain monetary stability.
• Market and geopolitical risks: Large-scale accumulation of bitcoin by governments may escalate economic tensions with countries developing alternatives, such as a currency backed by the BRICS group.
Strategic bitcoin reserves in other countries
While the United States moves forward with establishing a bitcoin reserve, other countries have taken a different approach. Some have actively accumulated their own bitcoin treasuries, while others have rejected it due to volatility, liquidity risks, and security concerns.
• El Salvador: The first and only country to officially integrate bitcoin into its national reserves, holding over 6,000 bitcoins through direct purchases, bitcoin bonds, and geothermal-powered mining.
• Bhutan: Accumulating bitcoin through state-controlled hydroelectric mining, utilizing excess electricity to generate bitcoin without direct exposure to the market.
• European Union: The European Central Bank opposes bitcoin reserves, calling them too volatile, but the Czech Republic is actively discussing their inclusion in national holdings.
• Switzerland: A constitutional proposal seeks to require the Swiss National Bank to hold bitcoin, but Swiss National Bank President Martin Schlegel rejected the idea, citing stability and liquidity concerns.
• Russia, Iran, and BRICS countries: Exploring blockchain-based reserve currencies as alternatives to bitcoin, but none have officially adopted bitcoin in their official monetary strategies.
China: China holds 194,000 bitcoins seized from enforcement actions, but despite the ban on bitcoin trading, it has not included bitcoin in its national reserves.
Final thoughts
The United States is leading the strategic bitcoin reserve race, having integrated bitcoin into its national holdings while other countries remain divided on its viability.
Some countries view it as a hedge against inflation and a shift towards digital assets, while others see it as too volatile and unproven for sovereign reserves.
As the global debate continues, the success or failure of the U.S. approach will set a precedent for how governments handle bitcoin and its unique reserve holdings in the coming years.