On the Bitcoin 2024 convention in Nashville, Donald Trump unveiled his proposal to determine a Strategic Bitcoin Reserve (SBR) for the US upon his return to workplace. The plan has swiftly captured widespread consideration, notably within the wake of Trump’s US electoral victories securing majorities in each the Home of Representatives and the Senate.
“Establishing a Strategic Bitcoin Reserve will place the US on the forefront of the digital economic system, making certain our monetary sovereignty and financial resilience,” Trump declared throughout his keynote on the convention. Nevertheless, it’s nonetheless unclear if that is permitted by regulation.
Can Trump Order A Strategic Bitcoin Reserve?
A brand new authorized evaluation carried out by the Bitcoin Coverage Institute, authored by legal professional and startup advisor Zack Shapiro, examines the feasibility of Trump’s proposal inside the present authorized framework. Shapiro explores whether or not the institution of an SBR is permissible underneath the authority of the US Division of the Treasury, notably by the utilization of the Alternate Stabilization Fund (ESF).
“The Alternate Stabilization Fund (ESF) is a potent but underutilized monetary instrument that would theoretically be leveraged to accumulate Bitcoin as a strategic asset,” Shapiro explains. “The ESF’s mandate, codified in 31 USC. § 5302, grants the Secretary of the Treasury broad discretion to handle property that stabilize the worth of the US greenback.”
The ESF, established in 1934 underneath the Gold Reserve Act throughout the Nice Despair, was initially funded with $2 billion from the revaluation of US gold reserves. Its major objective was to stabilize the US greenback and handle worldwide financial considerations, offering the Treasury Secretary with the pliability to intervene in overseas alternate markets with out direct congressional approval.
Shapiro notes that whereas the ESF was initially centered on conventional property like gold and foreign exchange, the statutory language doesn’t explicitly restrict the varieties of monetary devices that may be utilized, supplied they serve the aim of stabilizing the greenback.
To find out the legality of the Treasury Division utilizing the ESF to buy BTC, Shapiro addresses two important questions. First, can the ESF legally purchase BTC underneath its approved asset classes? Though Bitcoin doesn’t match neatly into conventional classifications reminiscent of gold or overseas alternate, Shapiro posits that BTC may very well be built-in by devices of credit score.
“Whereas Bitcoin itself shouldn’t be an instrument of credit score, the Treasury can have interaction in transactions the place Bitcoin is acquired by such devices,” Shapiro elaborates. This would possibly contain the ESF buying Bitcoin-denominated debt obligations from certified counterparties, reminiscent of monetary establishments or BTC mining corporations, with repayments structured in BTC upon maturity. This method aligns with the ESF’s authority to “deal in… devices of credit score.”
The second query considerations whether or not buying BTC would fulfill the ESF’s statutory objective of stabilizing the alternate worth of the greenback. Shapiro argues that given the unprecedented ranges of US nationwide debt and considerations over long-term financial stability, incorporating Bitcoin—a decentralized forex with a set provide—might improve belief within the US monetary system.
“Bitcoin’s fastened provide and deflationary nature current a reputable hedge in opposition to inflation,” Shapiro asserts. “By including Bitcoin to the nationwide stability sheet, the US can improve fiscal accountability and sign innovation, probably stabilizing the greenback’s alternate fee over the long run.”
Shapiro additional outlines the sensible mechanisms by which the Treasury might purchase Bitcoin utilizing the ESF. He means that the Treasury might make the most of convertible devices of credit score, reminiscent of bonds or notes issued by certified counterparties that promise compensation in BTC upon maturity.
“This mechanism permits the Treasury to accumulate Bitcoin with out immediately buying it on the open market, thus avoiding potential market disruptions or value spikes that would end result from giant direct purchases,” Shapiro explains. He concludes: “The ESF was created to offer the Treasury with the pliability to intervene in overseas alternate markets with out direct congressional approval.”
At press time, BTC traded at $89,339.
Featured picture created with DALL.E, chart from TradingView.com
