More than a dozen states are considering implementing a fiscal policy that would have been unthinkable just a few years ago: holding a strategic Bitcoin reserve.
Here’s the idea: an individual state buys a set number of Bitcoins to diversify its assets and act as a hedge against inflation. But some fear the new trend is just an attempt to capitalize on crypto’s newfound political clout, and could lead to disastrous consequences down the road.
Some state-level politicians have been discussing creating Bitcoin reserves in earnest since November as President Donald Trump signals his support for a national Bitcoin reserve, buoyed by rising crypto prices over the last few months. But the idea became more serious when Trump signed an executive order last week assembling a group of government officials to explore the creation of such a national stockpile.
Montana and South Dakota are the latest states to enter the crypto fray. Earlier this week, South Dakota Republican State Representative Logan Manhart announced on X that he plans to introduce a bill that would establish a Bitcoin stockpile in the state. “Now is one of the few chances government has at being proactive,” Manhart wrote. “Let’s have this conversation!”
State Bitcoin reserves are still very much more fantasy than reality, but interest in the topic has become undeniable. Here’s everything you need to know about the new crypto trend.
What is a Bitcoin reserve?
A Bitcoin reserve would be a government-owned and operated stash of the crypto coins, similar to stores of gold or oil.
The concept of a national reserve first gained traction last July when then-presidential candidate Trump promised to put the federal government’s 200,000 Bitcoins—acquired through seizures from criminal entities—towards a “strategic national Bitcoin stockpile.”
Since his election, Trump has reiterated his support for the stockpile, sparking renewed interest in a Senate bill introduced by Wyoming Congresswoman Cynthia Lummis’ last summer which would direct the national government to purchase 1 million Bitcoins over five years.
On the state-level, Pennsylvania was the first to introduce a Bitcoin reserve bill in November of 2024, triggering a slew of others to follow suit in hopes that Trump would deliver on his promise to make America, “the crypto capital of the planet.”
Fifteen states in total have either introduced or passed bills that seek to create Bitcoin reserves, including Alabama, Arizona, Florida, Kentucky Massachusetts, Montana, New Hampshire, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Texas, Utah and Wyoming.
Why do state governments want to do this?
Supporters argue that Bitcoin could potentially serve as a way for states to diversify their financial portfolios. Bitcoin has also traditionally been seen as a hedge against inflation because its price fluctuates independently from most fiat-currencies.
Zack Shapiro, head of policy at the Bitcoin Policy Institute, a non-profit crypto think tank, said that for these reasons Bitcoin could be a source of additional revenue.
“Especially with the incoming administration looking to rein in federal government spending, including on state initiatives, states do have to look at their balance sheet and their budget and be much more careful about how wealth is stored and how resources are allocated,” he said.
What are the downsides?
Bitcoin has been known to lose or gain thousands of dollars in the span of a few hours and has gone through multiple crashes in its short lifetime. That makes it a much riskier investment compared to things like stocks or cash reserves.
That’s why despite the potential benefits, David Krause, a professor of finance at Marquette University, warns that there are many risks involved in states investing government funds in Bitcoin or other crypto.
“I can say unequivocally this is the most volatile asset class I’ve ever seen,” Krause says.
How will states buy Bitcoin?
Different states have different strategy ideas, including selling off other assets, reallocating existing funds, or asking for donations.
Legislators in Oklahoma, New Hampshire, and Pennsylvania have proposed that their state allocates up to 10% of public funds—money currently used for government services and programs—to buy Bitcoin over a certain period of time.
Lawmakers in Texas have proposed a bill that would allow residents to make donations or pay government taxes and fees in Bitcoin, which the state would hold in a reserve for at least five years.
How would state reserves impact the price of Bitcoin?
It’s likely that if states begin to establish Bitcoin reserves, its price will increase dramatically. That’s because states buying large amounts of Bitcoin over a number of years would decrease the supply.
“Remember, there’s only 21 million Bitcoins that will ever be mined,” says Krause. “There are Bitcoin supporters who own it and want to create greater demand for it, because a limited supply with greater demand means prices go up.”
Is this a pipe dream, or will state Bitcoin reserves become a reality?
Whether these bills are a fad or a serious policy move remains to be seen. But stranger things have happened.
“It wasn’t more than 30 years ago, private equity seemed like an absolutely crazy, wild, innovative investment,” Krause said. “Now it’s a part of every institutional portfolio.”
However, voters may balk at the idea of the government dabbling in crypto, and legislators could face an uphill battle.
Ben Wiener, one of the founding members of the South Dakota Blockchain Institute, says that while he understands the argument for a national Bitcoin reserve, legislators will have to frame a state-level reserve in such a way that makes it sound like a win for everyone.
“It’s gonna be a tough sell in South Dakota,” he said.
