(Bloomberg) -- Donald Trump’s recent pledge to create a “strategic national Bitcoin stockpile” may turn out to be not as large of a commitment as the hype surrounding the announcement makes it seem.
“Trump’s proposal is extremely modest,” said George Selgin, director emeritus of the Center for Monetary and Financial Alternatives at the Cato Institute, a Washington-based public policy group. “It doesn’t have much of an economic implication.”
The US is estimated to hold approximately 200,000 Bitcoin, worth around $13 billion, primarily obtained through forfeitures and seizures related to criminal cases such as the the former black-market website Silk Road. The US Marshals Service typically auctions off the tokens, with proceeds used to support law enforcement, compensate victims and fund operations.
Trump’s only addendum to the government’s current policies is to prevent the digital asset from being sold, and instead to hold it in what he deemed a “Bitcoin stockpile” – a nod to other caches the US maintains, such as the Strategic Petroleum Reserve and Strategic National Stockpile of medical goods, to shield itself from negative supply shocks.
“The cost of Trump’s proposed reform consists only of whatever potential profit the government is giving up by holding onto Bitcoin,” Selgin said. “Since Trump said they should never sell it, it would become an entirely symbolic little stash.”
While the promise may turn out to be little more than symbolic, the status of the stockpile has captured the attention of the digital asset world in recent days. Traders have been fixated on alleged movements of about $2 billion in Bitcoin that blockchain analysis firm Arkham Research says is related to Silk Road. After initially jumping on Trump’s comments, the price of Bitcoin has fallen about 2% this week amid concern that an auction of the cryptocurrency could overwhelm demand.
The transfer of the alleged Silk Road tokens to another digital wallet has even raised speculation that the Biden administration is seeking to sabotage Trump’s ability to establish a reserve by selling the tokens ahead of the November election. The Marshals Service didn’t immediately respond to a request for comment on transfers of Bitcoin.
“The movement of assets held in the wallets under the control of governments often results in speculation of possible sales on centralized exchanges,” Joshua de Vos, research lead at CCData, said.
The on-chain activity is likely a transfer to an institutional custody service provider or deposit, de Vos added. In early July, the Marshal Service announced that it selected Coinbase Global Inc. for custody of its digital asset portfolio.
With crypto industry donors pouring more money into the 2024 election than in all prior cycles combined, Trump isn’t the only politician touting a Bitcoin reserve. Speaking at the Bitcoin 2024 conference after Trump, Republican Senator Cynthia Lummis of Wyoming announced plans to introduced a bill that would call for the US to acquire one million Bitcoin, or nearly 5% of the outstanding tokens, over five years. Under Lummis’ plan, the digital asset would be held for a minimum of 20 years and be used to reduce the national debt.
“The goal is to recognize the fact that Bitcoin is a durable asset,” Lummis said in an interview with Bloomberg News. “It’s digital gold and would provide assurance around the world that the US dollar remains worthy of being a world currency.”
In contrast to Trump’s plan, Lummis’ entails buying Bitcoin, in addition to holding the roughly 200,000 Bitcoin the government already possesses. To do so, Lummis would likely need to go through the US Treasury and Federal Reserve, in addition to getting the bill through Congress, according to Republican Congressman Warren Davidson of Ohio.
“The challenge is that the chairman of the Federal Reserve hasn’t expressed support for this idea,” Davidson said. “The Federal Reserve is somewhat autonomous from the federal government, and the US government really doesn’t have assets.”
About 94% of the 21 million Bitcoin that will ever be minted are already in circulation. The cap, which is built into the software protocol to prevent Bitcoin from becoming inflationary, is expected to be reached around the year 2140.
Although Trump’s plan doesn’t entail buying new Bitcoin or much approval from other government branches, his assurance of a non-sale would still have market implications.
“Trump’s promise not to sell may stabilize or potentially increase market prices by removing a significant amount of Bitcoin from circulation,” de Vos said. “However, any actual market impact will heavily depend on government actions post-election.”
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