During the Bitcoin 2024 conference in Nashville, Donald Trump announced his intention to create a Strategic Bitcoin Reserve (SBR) for the US if he returns to the presidency. This proposal has gained significant attention, especially following Trump’s electoral successes in both the House and Senate.
Trump emphasized that, “The creation of a Strategic Bitcoin Reserve will position the US as a leader in the digital economy, safeguarding our financial independence and economic stability.” However, legalities surrounding this initiative remain uncertain.
Is Trump’s Proposal Within Legal Limits?
A recent legal inquiry by the Bitcoin Policy Institute, authored by lawyer Zack Shapiro, investigates whether Trump’s idea is attainable under current laws. The analysis looks into the potential authority of the US Department of the Treasury, specifically assessing the role of the Exchange Stabilization Fund (ESF).
Shapiro describes the ESF as a powerful but often overlooked financial tool that might enable Bitcoin acquisition as a strategic asset. “The ESF, formed under 31 USC. § 5302, gives the Treasury Secretary broad power to manage assets that stabilize the US dollar,” he states.
Established in 1934 during the Great Depression, the ESF was initially funded with $2 billion from the US gold reserve revaluation to maintain dollar stability and address international monetary issues, allowing the Treasury to act in foreign exchange markets without needing direct congressional consent.
Although the ESF primarily dealt with traditional assets like gold and currency, Shapiro notes its guiding language does not specifically prohibit the use of other financial instruments if they are in line with the goal of dollar stabilization.
In assessing whether the Treasury could legally use the ESF to buy Bitcoin, Shapiro raises two important questions. First, can the ESF legitimately acquire Bitcoin as part of its authorized asset pool? While Bitcoin does not align with traditional asset categories such as gold or foreign currency, Shapiro suggests it could be incorporated through credit instruments.
“Bitcoin itself isn’t a credit instrument, but the Treasury could facilitate transactions to acquire Bitcoin via such instruments,” Shapiro elaborates, proposing the ESF could acquire Bitcoin-linked debt from qualified sources like banks or Bitcoin mining companies, with repayment terms in Bitcoin at maturity. This method would stay within the ESF’s authority to “engage in… instruments of credit.”
The second consideration is whether Bitcoin acquisition would meet the ESF’s purpose of stabilizing dollar value. Shapiro believes that with rising US national debt and ongoing economic stability issues, adding Bitcoin—a decentralized currency with a finite supply—could bolster confidence in the US financial system.
Shapiro states, “Bitcoin’s limited supply and deflationary characteristics provide a solid protection against inflation. Integrating Bitcoin into the national balance sheet can foster fiscal responsibility and signal innovation, potentially stabilizing the dollar’s value long-term.”
He also details how the Treasury could achieve Bitcoin acquisition using the ESF by employing convertible credit instruments, such as bonds issued by certified entities that ensure repayment in Bitcoin.
“This strategy allows the Treasury to accumulate Bitcoin without venturing into the open market directly, minimizing any possible market fluctuations or price surges that might result from significant direct purchases,” Shapiro explains. He concludes: “The ESF was designed to give the Treasury the latitude to engage in currency markets without needing explicit congressional approval.”
As of now, Bitcoin is valued at $89,339.
