“We want all the remaining Bitcoin to be made in the USA!”

In a Truth Social post last month, Republican presidential candidate Donald Trump expressed strong support for bitcoin. In the same post, he recognized the geopolitical significance of the world’s largest cryptocurrency, warning that any policy that seeks to hamper bitcoin “only helps China and Russia.” Trump’s statement not only positioned him as the first pro-bitcoin nominee of a major political party—it also put a spotlight on discussions about classifying bitcoin as a strategic reserve asset.

These discussions are gaining traction in policy circles thanks to bitcoin-friendly political leaders. Former presidential candidate Vivek Ramaswamy, for example, has been advising President Trump on bitcoin and digital assets since January. Ramaswamy staked a unique position in the final weeks of his campaign by proposing that the dollar be backed by a basket of commodities that, in time, could include bitcoin.

Ramaswamy’s plan echoed a similar proposal from Independent presidential candidate Robert F. Kennedy, Jr., in which a small percentage of US Treasury bills “would be backed by hard currency, by gold, silver, platinum, or bitcoin.” The intent behind Ramaswamy and Kennedy’s proposals is to curb inflation by pegging the dollar to deflationary assets that maintain their value over time.

Senator Cynthia Lummis, the “Crypto Queen” of Congress, is another proponent of using bitcoin to better the nation’s finances. In February 2022, she suggested that the Federal Reserve diversify the $40 billion in foreign currencies that it held on its balance sheet by adding bitcoin. And she continues to see benefits in holding the digital currency as part of the nation’s financial portfolio.

After Trump’s post alluding to the growing political importance of bitcoin, I asked Senator Lummis for her perspective on discussions around bitcoin as a strategic reserve asset. Senator Lummis appears to be keen on the idea. In her own words: “bitcoin is an incredible store of value, and I certainly see the benefits of our country diversifying its investments.”

Trump, Lummis, Kennedy, and Ramaswamy represent a new crop of policymakers who are open to the potential of bitcoin as a tool of economic statecraft.

So how could the United States leverage a digital commodity like bitcoin to strengthen its own fiscal health and geopolitical position?

Leveraging Bitcoin As A Strategic Reserve Asset

To help answer this question, I reached out to Alex Thorn, the head of firmwide research at Galaxy Digital. Thorn has written extensively on the impact bitcoin could have on the global financial system. And he sees merit in the idea of bitcoin as a strategic reserve asset.

“As a global decentralized commodity money with sound properties, bitcoin will undoubtedly play a growing role in geopolitics and international trade,” said Thorn. “What started as hobbyists using their home computers has elevated to industrial manufacturing, institutional portfolios, and corporate balance sheets. There’s every reason to believe that the bitcoin network layer will expand further to include nation states.”

Here’s the logic behind Thorn’s thinking: As with any scarce commodity—be it oil, gold, or rare-earth minerals—countries often engage in fierce competition with each other to secure the lion’s share of resources. And as one of the scarcest commodities on planet earth, there’s little reason to believe bitcoin would be any different, especially if its value continues to grow as many financial analysts expect.

As a case in point, Jurrien Timmer, Fidelity’s director of global macro, has described bitcoin as “exponential gold.” Were it to achieve parity with gold’s current market cap, a single bitcoin would be approximately $700,000—more than ten times its worth today. The potential of such stratospheric returns makes it all the more enticing for sovereigns to accumulate bitcoin now instead of waiting for other countries to do it first.

Despite the lack of any coherent bitcoin strategy, the United States currently leads the digital gold rush. It is the largest nation-state holder of bitcoin, having seized the bulk of its bitcoin stack from illicit actors over the last decade. The country also boasts the most network nodes, hashrate, and Bitcoin mindshare of any country in the world. And if Trump were to win in November, the nation would have its first pro-bitcoin president.

These factors place the United States in a strong position to become the MicroStrategy of nations, should that be a policy priority for a future administration.

Case Studies: MicroStrategy and El Salvador

MicroStrategy is a legacy technology company that was on the wane in the 2010s. But it catapulted itself back into relevance in August 2020 after announcing that it had begun accumulating bitcoin as a treasury reserve asset.

Since this announcement, MicroStrategy’s stock price has increased more than 900%, and it is now the largest corporate holder of bitcoin in the world. The company currently owns 226,000 total bitcoin—more than the United States or any other country.

Some financial policymakers are now wondering if MicroStrategy’s success can be replicated on a nation-state level. El Salvador serves as a compelling beta test for this strategy.

In 2021, El Salvador President Nayib Bukele declared bitcoin legal tender and announced that the country would begin purchasing bitcoin as a treasury reserve asset. El Salvador is up about 50% on the bitcoin it bought in the leadup to the bull market. And President Bukele has made clear his intentions to hold bitcoin for the long term. In his own words: “We won’t sell, of course. At the end, 1 BTC = 1 BTC.”

Scaling The MicroStrategy Playbook

One way the United States could leverage bitcoin as a strategic reserve asset is by pulling a page from the MicroStrategy and El Salvador playbooks.

As the largest nation-state holder of bitcoin, the United States already has a leg-up over other countries in accumulating digital gold. But classifying—and then treating—bitcoin as a strategic reserve asset would kick the nation-state race for bitcoin into high gear.

As Alex Thorn explained, “Simple game theory dictates that adoption by one nation necessitates that other nations consider the same, whether friend or foe.”

That game theory would only accelerate if the United States—the wealthiest nation in the world and the home of global capital—were the first developed country to begin accumulating bitcoin as a strategic reserve asset. This decision would fast-track global acceptance of bitcoin as a long-term savings instrument and a form of digital gold. In this scenario, the United States would enjoy the greatest windfall in profit among OECD countries as a result of holding first-mover advantage.

Weighing Pros And Cons

Of course, as with any bold strategy, there are always tradeoffs. To get a broader sense of the pros and cons of adopting bitcoin as a strategic reserve asset, I reached out to Matthew Pines, a national security fellow at the Bitcoin Policy Institute.

Among the pros, Pines said that this move “could position the United States well versus authoritarian challengers (who may be considering their own hard asset diversification and hedging strategies) while signaling it intends to lead emerging open digital finance networks.”

But among the cons: “This strategy would face substantial challenges, including regulatory hurdles, introduction of additional uncertainty into the US Treasury market (even if it may serve as a gold-like substitute for hard assets on the national balance sheet), and political opposition that could undermine its sustainability.”

Pairing Bitcoin and Stablecoins

Policymakers could mitigate uncertainty in the US Treasury market, however, by pairing a bitcoin adoption strategy with robust promotion of dollar-based stablecoins.

Stablecoin providers today are the 18^th largest holder of US debt, holding approximately $120 billion in US Treasury notes. To put that figure in perspective, stablecoin providers today hold more US Treasurys than some of the United States’ largest trading partners, including Germany and South Korea. What’s more, the brokerage firm Bernstein predicts that the stablecoin market will grow exponentially over the coming decade, reaching a total market cap of $3 trillion by 2028.

As former Speaker of the House Paul Ryan wrote in The Wall Street Journal last month, USD stablecoins could create unprecedented demand for US Treasurys and even stave off a debt crisis. According to Ryan, it’s incumbent on US policymakers to see stablecoins for what they are: a generational opportunity to expand dollarization and shore up the market for Treasurys.

A holistic digital asset strategy is key to achieving this goal. Such a strategy would seek to increase demand for US debt through stablecoins while simultaneously strengthening the nation’s overall balance sheet through bitcoin.

A robust balance sheet boosted by bitcoin in the early stages of nation-state adoption would only enhance the resiliency of the American economy. And a stronger economy would only increase trust in Treasury notes backed by the “full faith and credit” of the US government. With this strategy, policymakers could therefore lay the foundation for an unexpected future—one where bitcoin and the dollar grow together.