From CoinShares Research Blog by James Butterfill

We believe that the enactment of the Bitcoin Act in the United States would have a more profound long-term impact on Bitcoin than the launch of ETFs. While 2024 saw an impressive $44.2bn in ETP inflows — more than four times higher than any previous year, underscoring the success of ETF launches — we have yet to witness a substantial increase in institutional investment in the asset class.

At CoinShares through numerous interactions with institutional clients, we’ve observed that one of the primary barriers to investing in bitcoin is credibility among their colleagues and peers. Many fear ridicule for suggesting the inclusion of Bitcoin in portfolios, even though many of these individuals already hold Bitcoin in their personal accounts.

The approval and implementation of the Bitcoin Act — effectively granting Bitcoin the endorsement of the world’s largest government — would significantly diminish the stigma faced by institutional investors. Combined with other governments following suit, such a development could catalyse a much larger flow of assets into Bitcoin in the years to come.

Several countries are exploring the inclusion of Bitcoin as a strategic reserve asset to diversify their financial holdings and hedge against economic uncertainties. Notable examples include:

United States

There are currently two separate avenues being pursued for the establishment of a Strategic Bitcoin Reserve in the US. The first, by far most impactful, and also the most politically difficult one is the Bitcoin Act proposed by Senator Cynthia Lummis.

Under this act, the US would establish a Strategic Bitcoin Reserve, and issue dollar-denominated debt to buy 1,000,000 btc, or just under 5% of the total fully diluted supply of bitcoin, equally dispersed in 200,000 btc annual chunks over the next 5 years. These coins would be barred from sale for the next 20 years, unless they were used to pay back US national debt. If passed, the Bitcoin Act would be a matter of US law, meaning that it would compel both current and future governments to act in its accordance.

This would be a monumental happening for Bitcoin, and would likely trigger a global wave of nation state bitcoin purchases. Since the game theory of bitcoin acquisition favors those who are willing to take risk at the earliest instance, choosing not to follow the largest economy in the world onto a potential new monetary standard would be incredibly risky for any nation.

While its impact would be enormous, the chances of this bill passing are probably rather slim. Getting such a proposal through Congress would be a huge political challenge, and likely not one that Trump would consider to be a priority worth expending scarce political capital. But the chance is also not zero, so we do recommend paying close attention to the progression of this bill.

The second, and much more likely pathway towards a Strategic Bitcoin reserve is the recently leaked draft of an Executive Order instructing the Department of the Treasury to do the following:

So long as they do not violate the law, the President of the United States may issue Executive Orders as he deems necessary without consulting Congress. Hence, this order can be enacted by Trump at his discretion. An Executive Order is a matter of US policy, meaning that a future administration can remove and reverse it as they see fit.

Implementation of a Strategic Bitcoin Reserve via Executive Order is a much more likely outcome than implementation via legislation. Its impact would also be smaller and less future proof. However, any way it is implemented, the global signal effect would be clear: Bitcoin is no longer some shadowy underground asset unfit for serious asset allocators, it is a major global reserve asset used as a diversifier by the largest government in the world.

European Union

El Salvador

Brazil

Russia

Poland

Argentina

Japan

Canada

As a thought exercise, we looked at the top 20 countries with strategic reserve assets in gold and assumed they may follow the United States lead and sell 5% of those reserves to diversify into Bitcoin.

By our estimates this would equate to the purchase of US$110bn of Bitcoin representing 5.5% of total supply.

Bitcoin as an alternative to the dollar may not seem logical at first, given that it competes directly with the US dollar. Nevertheless, whether the US government likes it or not, the dollar is gradually losing its reserve currency status, raising questions about the efficacy of post–Bretton Woods monetary policy. As we have been advising clients, transitioning to a “Bitcoin standard” would be profoundly destabilizing to the global economy. Yet in essence, it is not very different from holding gold as a strategic reserve — an approach governments already employ.

From a theoretical standpoint, holding a diversified set of strategic reserve assets could help address the government debt issue. It is too simplistic to dismiss Bitcoin merely because it competes with the dollar, and we also disagree with those who claim there is no crisis surrounding the dollar. Indeed, as we highlighted in our 2025 outlook, central banks are diversifying their reserves, with the dollar’s share declining from 71% in 2000 to 59% in 2022, according to IMF data.

If the United States were to purchase Bitcoin as a strategic reserve asset, it would dramatically increase Bitcoin’s credibility and potentially have a substantial impact on its price, creating a ripple effect throughout the global economy. It is therefore encouraging to see many countries now considering Bitcoin for their strategic reserves, as it makes perfect sense to hold what is arguably one of the hardest and most immutable assets in the world.