In late July 2024, 35,000 people came together in Nashville, Tennessee for the Bitcoin 2024 Conference. The three-day event featured a coterie of speakers, among them key developers, CEOs, Edward Snowden, an MMA fighter, comedians, journalists, a handful of U.S. Senators, and one loquacious presidential candidate: now president-elect Donald Trump.
Trump’s speech, which went for nearly fifty minutes, culminated with his proposal that the U.S. establish and maintain a strategic stockpile of Bitcoin, as a hedge against inflation and the ever-ballooning national debt.
In Trump’s words: “Many Americans don’t realize that the United States government is one of the largest holders of Bitcoin…the federal government has almost 210,000 Bitcoin, or 1% of the total supply that will ever exist. But for too long our government has violated the cardinal rule that every bitcoiner knows by heart: Never sell your Bitcoin.”
Hodler in Chief
The U.S. government’s Bitcoin holdings, estimated to be around $19 billion, have slowly been amassed over the last decade via criminal seizures. As it stands, the U.S. Marshal Service, a law enforcement agency under the purview of the Department of Justice, controls these crypto holdings and, when given clearance, auctions off tokens for fiat currency (i.e. U.S. dollars).
In October, after a protracted fight in lower courts, the Supreme Court declined to hear a case pertaining to 69,370 Bitcoins seized from the Silk Road, currently worth over $6 billion. The Supreme Court’s disinterest in the case effectively maintained the lower court’s ruling, which has cleared the path for the U.S. Marshal Service to auction off the coins. (The Silk Road was a digital black market which operated from 2011 to 2013 which allowed buyers and sellers to anonymously buy and sell illicit drugs, guns and other services).
However, the outcome of the presidential election has likely put a moratorium on Bitcoin auctions. When Trump returns to the presidency not only will the President-elect enjoy a unified government to enact policy, but also bipartisan supporters in the House and Senate of a national Bitcoin stockpile.
The loudest of these voices by far is Wyoming Senator Cynthia Lummis, a fellow speaker at the Bitcoin 2024 Conference who also believes in the need for a strategic national stockpile. Mere days after the conference, Senator Lummis proposed a bill to Congress, entitled the Bitcoin Act (Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide), which would implement the slow and steady buying of Bitcoin until the U.S. held 5% of the world supply, (5% being roughly the percentage of the world’s supply of gold the Federal Reserve currently holds).
Senator Lummis, in a rhetorical flourish, referred to the act as “our Louisiana Purchase moment,” in reference to Thomas Jefferson’s early 1800s land purchase from the French which effectively doubled the size of the United States. Both she and the President-elect see a sovereign Bitcoin stockpile as a store of value that could increase to such heights that it could pay off the national debt, which currently stands at $35 trillion.
However, prediction markets rate the chance of a strategic Bitcoin stockpile as unlikely due to a number of factors: Bitcoin’s inherent volatility, the vast majority of Congress’ lack of a sophisticated understanding of crypto, and concern that investors would frontrun the government’s purchase of the asset which would inflate the price.
Unlike the U.S. dollar, which the federal government has the power to print, amassing a Bitcoin stockpile that’s 5% of the world supply would cost billions of dollars. In response to her colleague’s perceived hesitance regarding the stockpile’s price tag, Senator Lummis has recently proposed a solution: have the federal reserve sell off some of its gold to pay for Bitcoin.
Given that President-elect Trump has projected that “one day [Bitcoin] probably will overtake gold,” it will be interesting to see if Senator Lummis’ proposal gains traction with other members of Congress. In Ohio, the chair of the Senate Banking Committee, Sherrod Brown, has lost his bid for reelection. Brown, a long-time critic of the crypto space, had not allowed for a vote on Senator Loomis’ Bitcoin Act. He is replaced by businessman Bernie Moreno, chairman of the board of a blockchain company.
Anybody Lose Some Bitcoin?
Another looming question that has gone unaddressed pertains to the roughly 210,000 Bitcoin the federal government currently has in its custody:
In Trump’s words: “If elected, it will be the policy of my administration to keep 100% of all the bitcoin the U.S. government currently holds or acquires into the future…This will serve as the core of the strategic national bitcoin stockpile.”
Bitcoin prophets are already trumpeting the #BSS from the rooftops:
But, are there legal constraints to holding these tokens? In other words, how much of the 210,000 Bitcoin tokens the U.S. government holds in its custody are not legally the government’s to keep? According to forfeiture experts, Bitcoin that is legally designated to be auctioned off might be designated as such for the purpose of paying restitution to victims of fraud.
Ironically, at the end of Trump’s speech at the Bitcoin 2024 conference, he drew a connection between the conference attendees and the $19 billion of seized Bitcoin the U.S. government has in its coffers, painting the attendees as victims that were defrauded by the government of these assets:
“As you know, most of the bitcoin currently held by the United States government was obtained by law enforcement action. You know that. They took it from you.”
In actuality, at least half of the Bitcoin held by the U.S. Marshal Service comes from seizures related to the Silk Road. Given that among the attendees at the Nashville conference were CEOs of publicly traded companies, it’s unlikely that the audience was involved in the drug trade on the dark web a decade ago and subsequently ripped off by the government.
Yet, after making this statement, President-elect Trump closed his speech by vowing to commute the sentence of Ross Ulbricht, the founder of the Silk Road, who is serving a life sentence without the chance of parole. This brought on a large applause from the crowd, almost as big as the applause when he vowed to fire the CFTC Chair Gary Gensler on day 1.
It is indeed strange bedfellows: the corporate-influenced talking points of the Bitcoin 2024 Conference and the Silk Road, which enabled money-laundering and the sale of billions of dollars of illicit drugs. It’s all the stranger coming from a former president who has in the past called for the death penalty for drug dealers. I digress. Perhaps the disconnect, or rather the connection between the two, can best be described by the libertarian streak that runs through much of the crypto space.
The question remains how much of the original ethos of Bitcoin, so far as its core decentralization and libertarian values, will be left if the U.S. federal government becomes potentially the largest owner of Bitcoin in the world? Certainly, many stakeholders will cheer the creation of a U.S. stockpile, as it will undoubtedly raise the price of Bitcoin. But what about those who don’t have skin in the game? Some might argue the government is choosing winners and losers by publicly investing in a commodity. And what about the original purists, who embraced Bitcoin precisely because it was beyond the reach of the government?
Author: Laird Dilorenzo
#Crypto #Blockchain #DigitalAssets #DeFi
Laird Dilorenzo is a hatchet thrower and wordsmith.
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
