US Bitcoin Strategic Reserve Faces Congressional Budget Hurdle

Background on the Strategic Reserve Proposal

The concept of a U.S. Bitcoin Strategic Reserve, first championed by Senator Cynthia Lummis of Wyoming in 2024, has advanced further through the legislative process than many observers initially expected. The BITCOIN Act, which proposes that the U.S. Treasury acquire up to 1 million BTC over a five-year period to be held as a long-term strategic reserve asset alongside gold, has passed its initial committee review and now faces a critical budget reconciliation process.

Under the proposal, the Treasury would purchase Bitcoin through a combination of open-market acquisitions and consolidation of Bitcoin already held by U.S. government agencies. Law enforcement seizures from criminal cases, including the approximately 207,000 BTC currently held by the U.S. Marshals Service, would be transferred to the reserve rather than auctioned. The remaining balance would be acquired through scheduled purchases over the five-year accumulation period.

The Congressional Budget Challenge

The primary obstacle facing the reserve proposal is its cost. At current market prices, acquiring 1 million BTC would require approximately $70 billion to $85 billion in expenditures, depending on the pace and method of acquisition. The Congressional Budget Office (CBO) has been asked to provide a formal scoring of the proposal, with preliminary estimates suggesting the net cost, after accounting for already-held government Bitcoin, would fall between $55 billion and $72 billion.

Funding mechanisms remain contentious. The original bill proposed financing acquisitions through a combination of Federal Reserve remittances, revaluation of Treasury gold certificates, and general fund appropriations. Fiscal hawks in both parties have objected to the use of general fund money, arguing that taxpayer dollars should not be used to speculate on a volatile asset. The Budget Committee has requested alternative funding proposals that would be deficit-neutral.

Bipartisan Opposition and Support

The reserve proposal has generated unusual political alignments. Support comes from pro-crypto Republicans, a faction of fiscal conservatives who view Bitcoin as an inflation hedge comparable to gold, and some Democrats who see strategic benefits in the U.S. maintaining technological leadership in digital assets. Senator Lummis has argued that a Bitcoin reserve would strengthen the U.S. dollar's position as the world's reserve currency by diversifying national reserves.

Opposition spans both parties as well. Fiscal conservatives, including several members of the Senate Budget Committee, have questioned whether a government purchase program of this scale would constitute an unacceptable fiscal risk. Progressive Democrats have raised concerns about the environmental impact of incentivizing additional Bitcoin mining and the concentration of wealth that government purchasing could create. Federal Reserve Chair Jerome Powell has declined to endorse the proposal, stating that the central bank does not consider Bitcoin an appropriate reserve asset.

Treasury Department Feasibility Study

The Treasury Department released a preliminary feasibility study that assessed the operational, legal, and market impact considerations of establishing a Bitcoin reserve. The study concluded that while the acquisition is technically feasible, several significant concerns remain unresolved.

Among the key findings: open-market purchases of the proposed scale would likely impact Bitcoin's price, potentially increasing the total cost well beyond initial estimates. The study recommended a dollar-cost averaging approach with daily purchases spread across multiple exchanges and OTC desks to minimize market impact. Custody arrangements would require the development of new secure storage infrastructure, as existing government systems are not designed to hold digital assets at the proposed scale.

International Responses and Precedents

El Salvador remains the only nation that has made Bitcoin legal tender and maintains a sovereign Bitcoin reserve, currently holding approximately 5,950 BTC. Several other countries have explored similar concepts. Bhutan's government-owned investment arm has accumulated Bitcoin through mining operations powered by hydroelectric energy. The Czech National Bank's governor expressed interest in exploring Bitcoin as a reserve diversification tool, though no formal proposal has been advanced.

Critics of the U.S. proposal point to El Salvador's experience, where the government's Bitcoin purchases generated significant paper losses during the 2022 bear market, drawing criticism from the International Monetary Fund and credit rating agencies. Supporters counter that El Salvador's holdings have since appreciated substantially and that the U.S., with its far larger fiscal capacity, would be better positioned to absorb interim volatility.

Market Implications and Next Steps

The prospect of U.S. government Bitcoin purchases has already influenced market dynamics. Analysts estimate that a five-year accumulation program purchasing approximately 793,000 BTC (the gap between the 1 million target and existing government holdings) would require average daily purchases of roughly 435 BTC, or approximately $30 million per day at current prices. For context, spot Bitcoin ETFs collectively hold over 1.1 million BTC, with daily creation and redemption activity frequently exceeding $500 million.

The next procedural step is the CBO's formal budget score, expected within the coming weeks. Following that, the Senate Budget Committee will determine whether the bill proceeds through regular order or is attached to a broader spending package. Market participants surveyed by CoinGecko estimate a 20-30% probability that some version of the reserve legislation passes during the current Congressional session. The broader crypto market has shown sensitivity to developments in the legislative process, with notable price reactions following each major update.