Summary: The strategic Bitcoin reserve (#BTC) is a government-controlled Bitcoin reserve aimed at hedging against inflation, diversifying reserves, and enhancing financial security, but it carries risks such as volatility, regulatory uncertainty, and security vulnerabilities.
The United States is leading efforts to formalize a digital currency reserve through regulated assets, direct purchases, and mining, while Switzerland, the EU, and other nations 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 reserve or oil reserve, it is a managed digital asset reserve aimed at preserving national wealth and addressing monetary instability.
This concept emerged in the U.S. in July 2024, when Senator Cynthia Lummis introduced the Bitcoin Act to mandate 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 an American strategic reserve for digital currencies, which will include Bitcoin, Ethereum, Ripple, Solana, and Cardano. This marks the first time any administration has confirmed an active strategic reserve for digital currencies instead of a passive stock.
How will the American strategic Bitcoin reserve work?
The U.S. Bitcoin reserve will be a federally managed pool 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 "Made in America."
Key aspects of operating the reserve include:
• Seized digital currency holdings: The U.S. government holds over 210,000 Bitcoins from seized criminal assets. Instead of auctioning these assets, they will be permanently allocated to the reserve.
• Expanding beyond Bitcoin: Other American blockchains, such as Algorand, Stellar, and Avalanche, could be included to support local innovation, alongside 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.
• Integration of Bitcoin mining: The energy policy pursued by the U.S. administration supports local mining, with plans to direct Bitcoin mined from federally backed projects into 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 formally 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 its mining industry and exploring integration with its gold deposit system.
• Utah: House Bill 230 passed the House vote and is under review in the Senate, potentially making Utah one of the first states with an organized Bitcoin reserve.
• Arizona: SB1025 (Arizona Strategic Bitcoin Reserve Act) will allow allocating up to 10% of state funds for 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 bills are proposed, SB57 (Ohio Bitcoin Reserve Act) and HB18 (Strategic Digital Currency Reserve Act), for the state's organized investment in Bitcoin.
• New Hampshire: Legislation was introduced 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 approached Bitcoin reserves in different ways, with 7 states effectively holding Bitcoin reserves, 2 implementing partial reserves, 19 states considering legislation, and 5 states rejecting the idea. This will serve as a test for how Bitcoin reserves operate at the governmental 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 the national debt, a strategy that Senator Cynthia Lummis claims could halve the 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. Former 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.
Moreover, integrating digital currencies into national reserves accelerates financial innovation and enhances the country'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 historical track record of sharp crashes, with losses exceeding 80% in months, rendering its value unpredictable for government reserves.
• Regulatory uncertainty: Changing laws and unclear policies regarding taxation and international compliance may affect Bitcoin's legal status and usability.
• Security vulnerabilities: Bitcoin reserves are digital and susceptible to cyberattacks, breaches, and internal fraud, requiring stringent custody and security measures.
• Lack of asset-backed stability: The value of Bitcoin is speculative and not tied to physical reserves, making it susceptible to market sentiment and liquidity crises.
• Impact on monetary policy: Holding Bitcoin could disrupt central bank strategies, making it harder to control inflation and maintain monetary stability.
• Market risks and geopolitical risks: Accumulating Bitcoin on a large scale by governments could heighten economic tensions with countries developing alternatives, such as a currency backed by the BRICS group.
Strategic Bitcoin Reserves in Other Countries
While the U.S. moves forward with a Bitcoin reserve, other countries have taken different approaches. Some have actively amassed their own Bitcoin reserves, 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 mining.
• Bhutan: Bitcoin accumulation through state-controlled hydropower mining, utilizing surplus electricity to generate Bitcoin without direct market exposure.
• European Union: The European Central Bank opposes Bitcoin reserves, deeming them too volatile, but the Czech Republic is actively discussing their inclusion in national holdings.
• Switzerland: A constitutional proposal seeks to mandate 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 nations: Exploring blockchain-based reserve currencies as alternatives to Bitcoin, but none have officially adopted Bitcoin in their official monetary strategies.
China: Holds 194,000 Bitcoins seized from enforcement actions, but despite banning Bitcoin trading, 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 see it as a means to hedge against inflation and transition toward digital assets, while others view it as too volatile and unproven for sovereign reserves.
As the global discussion continues, the success or failure of the American approach will set a precedent for how governments handle Bitcoin and unique reserve holdings in the coming years.