In March, an executive order directed the U.S. Treasury to create two new cryptocurrency stockpiles, intended to accompany existing strategic reserves of gold and foreign currencies. These new reserves will include cryptocurrencies seized by federal agencies in criminal or civil proceedings. The Washington Post reports that these new stockpiles are expected to hold more than $21 billion in cryptocurrency, with the majority being Bitcoin. Other digital assets like Ethereum, stablecoins, and tokens tied to companies such as FTX and Binance are also included.
The U.S. government’s crypto holdings, estimated to be worth around $20.9 billion as of May 28, are primarily composed of Bitcoin, which accounts for $20.4 billion of the total. The government’s approach to building its Digital Asset Stockpile is unconventional, relying on the seizure of crypto from criminal activities. This method allows for cost-neutral government holdings, as the reserves are funded by the crypto assets recovered from these seizures. The U.S. is not the only entity with a cryptocurrency reserve; two U.S. states have already created their own.
However, some in the crypto community, including Ethereum co-founder Vitalik Buterin and professor Austin Campbell, have expressed concerns about the government’s growing influence in the crypto space. Buterin argued that crypto’s mission is to counterbalance power, including that of governments, while Campbell highlighted the hypocrisy of crypto enthusiasts supporting government-led reserves despite the community’s historical stance on freedom from sovereign interference.
The government’s approach also raises questions about the security and transparency of its cryptocurrency holdings, as these are monitored through blockchain analytics firms like Chainalysis. The agency’s strategy for selecting government financial holdings is unconventional, yet it has the benefit of making the reserves cost-neutral for the taxpayer. The U.S. government’s cryptocurrency reserves, while significant, are still less than the approximately $25 billion worth of oil held in the U.S. Strategic Petroleum Reserve. Their value is nearly double the Fed’s listing for U.S. gold holdings, although that figure uses outdated pricing and would be over $850 billion at current prices.
Overall, the U.S. government’s new strategic reserve of seized cryptocurrencies represents a significant shift in how the federal government is managing its financial assets. While the initiative aims to diversify the government’s reserves and provide cost-neutral holdings, it also raises important questions about the future of cryptocurrency regulation and the role of the government in the digital asset space.