Bitcoin as a Strategic Reserve: How Cities, States, and Nations Are Positioning Themselves for the Future of Money
In a rapidly evolving financial landscape, Bitcoin's rise as a strategic reserve asset is shifting conversations from niche cryptocurrency circles to national policymaking stages. From the recent legislative moves in Texas, Pennsylvania, and Ohio to a proposed federal bill advocating for a U.S. Bitcoin Strategic Reserve, the world is witnessing a race to embrace what could become the financial backbone of the future. This blog unpacks the key themes, implications, and considerations for policymakers and government officials exploring Bitcoin's potential as a strategic reserve asset.
2025 Crypto Market Predictions: From Strategic Reserves to Stablecoins
Origins of a “Strategic Bitcoin Reserve”
While countries like El Salvador and Bhutan have long had bitcoin in their national plans, it wasn’t until July 2024 that the concept of a “strategic bitcoin reserve” was coined.
Senator from Wyoming, Cynthia Lummis, coined the term during her speech at the BTC2024 conference in Nashville, where she released a draft bill that would have the US Federal Government establish a Strategic Bitcoin Reserve, akin to the nation’s Strategic Oil Reserve, by purchasing 1 million bitcoin over 5 years.
Not to be outdone, Robert F. Kennedy announced a proposal to purchase 4 million bitcoin at the same conference. However, it seems as if Senator Lummis’ bill has more traction as of now time of writing.
Then, at the same conference, then presidential-nominee Donald Trump gave a speech stating he wanted to make “America the crypto capital of the world,” and that he wanted to “make all the bitcoin in America.” After surviving an assassination attempt and a general election, now President-elect Donald has surrounded himself with pro-bitcoin advisors, cabinet, and transition team, further adding to the narrative that this administration will treat the industry vastly different than the previous one. In fact, Donald Trump has been involved with the launching of a DeFi Protocol, World Liberty Financial, and has an on-chain wallet where the world is tracking his purchases of Ethereum, Chainlink and more, boding well the for the industry.
Why Bitcoin Now for Your City, State, or Nation?
As inflation erodes purchasing power and global economic dynamics shift, Bitcoin is increasingly being seen as a hedge against financial instability. Unlike traditional fiat currencies, Bitcoin offers:
Decentralization: Immune to direct government control or monetary policies.
Finite Supply and Inflation Hedge: Only 21 million Bitcoin will ever exist, making it a "hard asset" akin to gold.
Transparency: Bitcoin's non-correlation to traditional assets enhances portfolio diversification, mitigates systemic risk, and offers a hedge against market volatility.
However, even more importantly for the long term, is that the choice of reserve currency has historically shaped national dominance and global power dynamics, as seen with gold's role in economic success.
Bitcoin, often dismissed as "magic internet money," represents a transformative opportunity for nations to secure future influence and prosperity. By adopting Bitcoin strategically, countries could redefine their global standing, making this decision one of the most critical for shaping long-term economic and geopolitical outcomes.
Whether you are at the city, state, or national level, now is the time to consider your plan for a potential future with bitcoin playing a strategic role.
State-Level Legislation: The First-Movers
In lieu of this backdrop and economic challenges, US states have begun to act. In November of 2024, the first US state strategic bitcoin reserve bills have been introduced into the legislature. Shortly thereafter, 2 more states in December have released bills of their own.
Pennsylvania, Texas, and Ohio are pioneering the concept of state-level Bitcoin reserves:
Pennsylvania: Introduced the first SBR bill in November 2024, allowing up to 10% of state funds to be allocated to Bitcoin by the State Treasurer. The bitcoin can be held at a custodian, via an ETF, and can even be loaned in certain conditions deemed "non-risky" by the Treasurer. The bill emphasizes Bitcoin as a hedge against inflation within a opening manifesto
Texas: Offers a unique donation-based reserve model, encouraging citizens to contribute Bitcoin while maintaining it in state-controlled custodial solutions.
The funds donated must be held for atleast 5 years and included requirements for biannual audits overseen by the State Comptroller.Ohio: Authorizes the State Treasurer to manage bitcoin without much more detail.
All bills are relatively short, averaging around 4 total pages. Additionally, all bitcoin in each state proposal falls under the oversight of the State Treasurer or Comptroller, who can use qualified custodians, ETFs, modified self-custody models, or trusts (depending on the state) to hold the bitcoin. Interestingly, no state has introduced legislation to acquire or purchase bitcoin.
The Federal Push: A Bold Proposal for National Reserves
As mentioned previously, July 2024 was a turning point in the Strategic Bitcoin Reserve narrative, with Senator Lummis introducing her SBR bill.
Senator Cynthia Lummis’s federal bill proposes establishing a U.S. Strategic Bitcoin Reserve (SBR), with plans to acquire 1 million Bitcoin over five years. Key details include:
Custody Model: A preference for self-custody, leveraging federal expertise in cryptography and cybersecurity to create a bitcoin “fort knox” that is distributed.
Debt Reduction: Bitcoin holdings would primarily serve to reduce federal debt over a 20-year horizon.
Interdepartmental Collaboration: Federal agencies like the Department of Defense and Homeland Security would assist in managing this sensitive national asset.
State Participation: States would be able to leverage the infrastructure at the Federal level to deposit and hold their bitcoin on their behalf.
The implications are vast. Not only would this move establish the U.S. as a leader in digital asset adoption, but it would also challenge global economic structures dependent on fiat dominance.
Proof of Reserves within the Federal SBR Bill
Proof of reserves (PoR) has emerged as a crucial mechanism to verify Bitcoin holdings. Mandated in Lummis’s federal bill, PoR would require:
Quarterly Reports: Detailing holdings, transactions, and cryptographic attestations over the bitcoin reserves.
Cryptographic Ownership Proofs: Leveraging digital signatures and other bitcoin-native cryptography.
Third-Party Audits: An independent part would have to oversee and perform the audits or attestation who have expertise in cryptographic expertise. Firms like The Network Firm!
This level of transparency could position Bitcoin reserves as a gold standard for financial accountability, especially in a global context, when consider global trade, debt markets, and overall trust between global powers.
Creating a Strategic Bitcoin Reserve for your City, State, or Nation?
While cities and states may have fewer financial resources and less flexibility, they still have a chance to capitalize on bitcoin innovation by creating their own strategic reserves. Below are key considerations for all government officials and policymakers considering a strategic bitcoin reserve.
Custody and Security
Who holds the Bitcoin in your SBR? Options range from:
Third-Party Custodians: Regulated entities providing secure storage.
Self-Custody: Governments managing their own cryptographic keys.
Collaborative Custody: A hybrid model involving multi-signature wallets for added security.
Transparency vs. Privacy
While transparency is a hallmark of Bitcoin, publishing wallet addresses, or transaction data raises national security concerns. Policymakers must balance openness with protecting sensitive financial information.
Budget and Financial Caps
Allocating funds to Bitcoin must align with broader financial strategies. Legislating caps (e.g., Pennsylvania's 10%) and defining use cases for reserves can mitigate political and financial risks.
Public Trust
Building public confidence is essential. Clear reporting standards, frequent audits, and proof-of-reserves systems can reassure citizens and stakeholders of the program’s integrity.
Insurance
Consider insurance over private keys or cybersecurity incidents to protect your SBR nest egg.
Policies & Process
Establishing protocols for key management, access, monitoring, and reporting will be key. Considering accounting and reporting tools like crypto-accounting subledger.
Public Perception
Whether acknowledged or not, bitcoin’s perception is not without preconceived notion. As a policymaker or public official, you should consider your constituency, and what narratives or benefits of bitcoin should be highlighted most to suite their needs. Is it inflation and cost of living that is top of their mind? Or is the narrative tech and innovation? Consider the messaging that would land well with your constituents.
Budget for a Team
Adopting Bitcoin as a strategic global asset requires external expertise in custody, policy development, and reserve management, as most organizations lack the in-house polymathic expertise needed. Budgeting for roles like a project manager, treasurer, and custodian is essential. Failing to adapt risks a significant loss of influence, prosperity, and quality of life.
Why This Matters for the Future
Adopting Bitcoin as a strategic reserve isn’t merely a financial move—it’s a geopolitical one. Nations that integrate Bitcoin into their financial ecosystems could:
Gain Economic Resilience: Hedge against inflation and fiat currency devaluation.
Enhance Global Standing: As first movers, they could influence the global financial system.
Attract Investment: A forward-thinking approach may draw tech and financial innovation.
Conversely, inaction could lead to diminished influence, especially as competing nations or states capitalize on Bitcoin’s growing prominence.
Get In Touch
Contact The Network Firm, the largest crypto-only CPA firm in the U.S., for expert assistance with audit, accounting, and advisory needs. Our team of professionals has extensive experience leading clients through successful engagements for varous types of crypto companies, including stablecoins, exchanges, custodians, miners, and more.
Conclusion
The decisions made today about Bitcoin’s role in government reserves will reverberate for decades. From cities to nations, understanding the strategic potential of Bitcoin is no longer optional—it’s imperative. Whether driven by economic prudence, technological innovation, or geopolitical strategy, embracing Bitcoin could be the key to securing a prosperous future.
If you’re a policymaker, financial expert, or curious citizen, now is the time to engage with these ideas. The window for leadership in this emerging financial paradigm is narrow but impactful.
Bitcoin isn’t just a digital currency; it’s a tool for influence, security, and prosperity in an uncertain world. The question is—how will your city, state, or nation respond?
Get In Touch
Contact The Network Firm, the largest crypto-only CPA firm in the U.S., for expert assistance with audit, accounting, and advisory needs. Our team of professionals has extensive experience leading clients through successful engagements for varous types of crypto companies, including stablecoins, exchanges, custodians, miners, and more.
Jeremy Nau, CPA
Author Bio:
Jeremy is a founding member and audit partner at The Network Firm and co-creator of LedgerLens, a suite of digital asset-focused audit and attestation tools. Jeremy holds credentials as a Certified Public Accountant (CPA), Certified Management Accountant (CMA - inactive), and Certified Bitcoin Professional (CBP).
Over his 10-year career, including 7 years focused on digital assets, Jeremy has led audit and attest engagements across various industry niches, including exchanges, custodians, miners, token projects, wallets, payment processors, and stablecoins. Jeremy specializes in “Proof of Reserve” engagements.
Jeremy’s goal is to shape the future of the accounting profession, strengthened by verifiable, transparent, and trusted blockchain ledgers.
Connect with Jeremy Nau on LinkedIn/Twitter for more expert advice.