Bitcoin May Become a New Strategic Reserve Tool for U.S. State Governments

At a critical juncture where cryptocurrency intersects with traditional finance, a new legislative proposal is sparking widespread discussion. This draft, titled "2025 Bitcoin Strategic Reserve Act," aims to incorporate Bitcoin into the financial systems of U.S. states as a strategic reserve tool. This is not only an unprecedented attempt but also a bold step taken in the context of increasing global economic uncertainty, aimed at combating inflation and enhancing financial resilience.

Bitcoin: A New Type of Reserve Asset for State Governments?

With the changes in the political landscape, the idea of incorporating Bitcoin into national strategic reserves seems to be closer to reality. The goal of the "2025 Bitcoin Strategic Reserve Act" is to authorize state treasurers to include Bitcoin in their financial reserves to guard against asset depreciation caused by inflation.

Looking back at American history, there have been several major strategic acquisitions, such as the purchase of Manhattan, the Louisiana Purchase, and the acquisitions of California and Alaska in the 19th century. These transactions initially seemed risky, but ultimately brought significant economic and strategic benefits to the United States.

A similar logic can be applied to today's potential acquisitions of Bitcoin. As a forward-looking strategic asset, Bitcoin possesses a scarcity and long-term appreciation potential akin to those historically significant resources. By incorporating Bitcoin into state financial reserves, the United States hopes to continue this historically significant success and extend its financial dominance into the new era of the digital economy.

In the first part of the bill, lawmakers pointed out that inflation has severely eroded the purchasing power of state finances and retirement funds, affecting the economic well-being of residents. While state governments cannot control the federal money supply and macroeconomic policies, they have a responsibility to protect the financial health of the state. Therefore, Bitcoin has been put on the agenda as an anti-inflation asset. Data shows that Bitcoin's market value has skyrocketed over the past 16 years, now exceeding $1 trillion, which undoubtedly proves its potential in combating inflation.

Flexibility and Innovation: The Core Objectives of New Legislation

The draft proposes that the state government plans to allow Bitcoin and other digital assets to be included in the state treasury's investment portfolio through legislation, as a means to address inflation and economic uncertainty. The core objectives of the legislation include:

• Protect the purchasing power of state finances and prevent assets from depreciating due to inflation.
• Respond quickly to market changes and enhance returns through flexible investment policies.
• Ensure that investment strategies align with the goals of enhancing state economic security and financial resilience.

The bill emphasizes flexibility. In the context of an increasingly complex and rapidly changing global economy, traditional investment models often appear too rigid, while the introduction of digital assets like Bitcoin provides more diverse options for investment portfolios, enabling state governments to better cope with market risks.

Custody: Safeguards for Digital Assets

The draft proposes strict security requirements for the holding and management of digital assets. The custody methods for Bitcoin include three types: direct holding by state treasury, holding through qualified custodians, or holding through registered exchange-traded products (ETP). At the same time, the draft introduces a "secure custody solution" that requires private keys to be exclusively controlled by the government and stored in an encrypted environment, ensuring the security of assets through measures such as geographically dispersed data centers and multi-party governance structures.

The specific "secure custody solutions" include:

• Exclusive control of private keys: Encrypted private keys must be held by government entities and can only be accessed in an end-to-end encrypted environment.
• Geographically distributed data centers: The hardware devices for private keys must be stored in at least two geographically dispersed secure data centers.
• Multi-party governance structure: The authorization of each transaction must go through a multi-party governance structure to ensure strict approval and record-keeping.
• Disaster recovery mechanism: Custodial service providers must have a comprehensive disaster recovery mechanism.
• Regular code audits: Custodial solutions must undergo regular code audits and penetration testing by auditing firms.

Bitcoin Tax: A New Source of Funding for Public Services?

The fifth part of the bill concerns the payment methods for taxes and fees. According to the draft, taxes and fees paid in Bitcoin will be transferred to the state’s general fund, while the state fund will compensate the corresponding digital asset accounts in US dollars. This arrangement not only ensures the flexible use of funds but also signifies a significant increase in the acceptance of Bitcoin at the state level.

The process of paying taxes with Bitcoin is as follows:

1. Taxpayers can use Bitcoin to pay taxes, and these Bitcoins will first enter the state's general fund account.
2. The state general fund will compensate the designated digital asset account with an equivalent amount in US dollars to ensure financial balance.
3. Through blockchain technology, the income and expenditure process of Bitcoin is made public and transparent, reducing the risk of corruption and fund abuse.

In addition, the draft also allows state retirement funds to invest in products from registered digital asset exchanges, further enriching investment channels.

Behind Legislation: Experiments in Financial Innovation

The "2025 Bitcoin Strategic Reserve Act" is undoubtedly an unprecedented attempt and a microcosm of the modernization of the financial system. With a certain state passing the "Bitcoin Rights" bill, the introduction of this strategic reserve act seems logical and has far-reaching significance. Supporters are attempting to promote the application of Bitcoin in broader fields through such legislation, providing lawmakers with a perspective to understand blockchain technology and helping them seize opportunities in the digital age during the policy-making process.

In order to cope with the risks of significant Bitcoin fluctuations, the draft proposes some risk control measures:

• Investment cap: The state finance's investment in Bitcoin shall not exceed 10% of the total amount of the relevant fund.
• Asset Lending: Without increasing financial risk, state finances can obtain additional income by borrowing Bitcoin.
• Diversified investment strategy: Encourage state governments to continue investing in other traditional financial assets while introducing Bitcoin.

Whether this proposal can ultimately be widely accepted and implemented depends on the discussions and evaluations by state governments and the public. However, its ideas are undoubtedly worth referencing.

In short, the "2025 Bitcoin Strategic Reserve Act" is ambitious, attempting to enhance the resilience and flexibility of public funds by integrating Bitcoin, an emerging digital asset, into the state financial system. Behind the legislation lies an urgent need to promote financial modernization and a cautious prevention of emerging risks. Whether this experiment can succeed and provide a new paradigm for future government investment and financial innovation remains to be seen.