A once-unthinkable fiscal policy is gaining traction across the U.S., as more than a dozen states explore the possibility of holding strategic Bitcoin reserves. The move, aimed at diversifying state assets and hedging against inflation, has ignited a debate over the potential economic benefits and risks of investing public funds in cryptocurrency.
Growing State-Level Interest
The concept of a state-run Bitcoin(BTC) reserve involves governments purchasing and holding a set amount of BTC, similar to traditional reserves of gold or oil. While some see this as a proactive financial strategy, others warn it may be a reaction to cryptocurrency’s rising political influence rather than a sound fiscal decision.
Discussions surrounding BTC reserves gained momentum in November when President Donald Trump reiterated his support for a national Bitcoin stockpile. His stance was further solidified last week when he signed an executive order assembling a government task force to explore its feasibility.
Following Trump’s endorsement, states such as Montana and South Dakota have joined the conversation. South Dakota Republican State Representative Logan Manhart recently announced plans to introduce a bill proposing a BTC reserve for his state. “Now is one of the few chances government has at being proactive,” Manhart wrote on X. “Let’s have this conversation!”
The Push for a National Bitcoin Reserve
The idea of a national BTC reserve first gained prominence last July when then-presidential candidate Trump proposed utilizing the federal government’s seized 200,000 Bitcoins to establish a strategic stockpile. Since taking office, his administration has expressed continued interest, spurring renewed discussions in Congress.
A bill introduced by Wyoming Congresswoman Cynthia Lummis last summer proposes a phased acquisition of 1 million Bitcoins over five years. Meanwhile, at the state level, Pennsylvania was the first to propose a Bitcoin reserve bill in November 2024, setting off a wave of similar initiatives in 15 states, including Alabama, Arizona, Florida, Kentucky, Massachusetts, Montana, New Hampshire, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, and Wyoming.
Why Are States Interested?
Proponents argue that Bitcoin could serve as a valuable asset diversification tool and a hedge against inflation. Zack Shapiro, head of policy at the Bitcoin Policy Institute, suggests that with federal spending cuts looming, states need innovative ways to manage their resources.
“States have to be much more careful about how wealth is stored and how resources are allocated,” Shapiro explained, highlighting Bitcoin’s potential to provide financial stability.
The Risks and Challenges
Despite its potential, Bitcoin remains highly volatile. The cryptocurrency has experienced significant price swings, sometimes losing or gaining thousands of dollars within hours.
David Krause, a finance professor at Marquette University, warns that investing public funds in Bitcoin carries substantial risk. “I can say unequivocally this is the most volatile asset class I’ve ever seen,” he stated.
How Would States Fund Bitcoin Reserves?
Different states have proposed various methods to finance their BTC reserves. Some, like Oklahoma, New Hampshire, and Pennsylvania, have suggested reallocating up to 10% of public funds to acquire BTC. Texas lawmakers have introduced a bill allowing residents to make donations or pay taxes in Bitcoin, which the state would then hold for at least five years.
Potential Impact on Bitcoin’s Value
If multiple states begin accumulating BTC reserves, the cryptocurrency’s price could surge due to increased demand and limited supply.
“There are only 21 million BTC that will ever be mined,” Krause noted. “With states buying large amounts, the reduced supply could drive prices higher.”
A Passing Trend or a Lasting Policy Shift?
Whether state-level BTC reserves become a reality remains uncertain. While some view the idea as a policy fad, others believe it could become an established financial strategy.
“Thirty years ago, private equity seemed like a wild and risky investment,” Krause said. “Now it’s a standard part of institutional portfolios.”
However, public skepticism and legislative hurdles could slow the adoption of state BTC reserves. Ben Wiener, a founding member of the South Dakota Blockchain Institute, believes states must present the idea in a way that resonates with constituents.
