The State Government's New Strategic Asset: A Vision for the 2025 Bitcoin Reserve Plan

At the intersection of cryptocurrency and traditional finance, a new legislative proposal has sparked widespread attention. This draft, titled the "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 measure taken in the context of increasing global economic uncertainty to address inflation and enhance financial resilience.

Bitcoin: A New Reserve Asset for State Governments?

As the political situation changes, discussions on incorporating Bitcoin into the national strategic reserves have deepened. The goal of the "2025 Bitcoin Strategic Reserve Act" is to authorize state treasurers to include Bitcoin in their fiscal reserves to hedge against asset depreciation caused by inflation.

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

The same logic can be applied to the potential acquisition of Bitcoin today. Bitcoin, as a forward-looking strategic asset, possesses a scarcity and long-term appreciation potential similar to those historically important resources. By purchasing Bitcoin and incorporating it into state financial reserves, the United States may extend its financial dominance into the new era of the digital economy, continuing the successful experience of achieving great accomplishments in history.

In the first part of the "2025 Bitcoin Strategic Reserve Act", lawmakers clearly pointed out that inflation has severely eroded the purchasing power of state finances and retirement funds, affecting the economic well-being of residents. Although 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, as an anti-inflation asset, has been put on the agenda. Data shows that Bitcoin's market value has rapidly soared over the past 16 years, now exceeding $1 trillion, which undoubtedly proves its potential in combating inflation.

Flexibility and Innovation: The Intent of New Legislation

In the draft, the state government plans to allow Bitcoin and other digital assets to be included in the state's financial investment portfolio through legislation, as a means to cope with inflation and economic uncertainty. The core goal of the legislation is to:

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

The bill emphasizes flexibility. In the context of a global economy that is becoming increasingly complex and fast-changing, traditional investment models often appear too rigid, while the introduction of digital assets such as Bitcoin provides more diverse options for investment portfolios, enabling state governments to better respond to market risks.

Secure Custody: Safeguards for Digital Assets

The draft sets strict requirements for the security of holding and managing digital assets. Specifically, there are three custody methods for Bitcoin: direct holding by the state treasury, holding through qualified custodians, or holding through registered exchange-traded products (ETPs). At the same time, to ensure the security of digital assets, the draft proposes a "secure custody solution"—requiring that private keys be controlled solely by the government and stored in an encrypted environment, with measures such as geographically distributed data centers and multi-party governance structures to ensure the security of the assets.

Specifically, the "secure custody solution" includes the following measures:

• 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 to prevent risks associated with single-point failures.
• Multi-party governance structure: The authorization for each transaction must go through a multi-party governance structure to ensure that all transactions are subject to strict approval and record-keeping.
• Disaster Recovery Mechanism: Custodial service providers must have a comprehensive disaster recovery mechanism in place to ensure that state governments can still access and manage assets when the provider is unable to fulfill their duties.
• Regular code audits: Custodial solutions must undergo regular code audits and penetration testing by auditing firms, and promptly fix any identified vulnerabilities.

Bitcoin Taxation: 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, and the state fund will compensate the corresponding digital asset account 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.

Specifically, the process of paying taxes with Bitcoin is as follows:

• Tax payment: Taxpayers can use Bitcoin to pay taxes, and these Bitcoins will first enter the state's general fund account.
• Fund conversion: The state's general fund will compensate the specified digital asset account with an equivalent amount in US dollars to ensure financial balance.
• Transparent Management: Through blockchain technology, the income and expenditure process of Bitcoin is made public and transparent, reducing the risk of corruption and misuse of funds.

In addition, the draft also allows state retirement funds to invest in products from registered digital asset exchanges, further enriching investment channels. These measures indicate that Bitcoin is not only a tool for combating inflation but may also become part of the funding sources for public services, gradually integrating into people's daily lives.

Behind the Legislation: An Experiment in Financial Innovation

The "2025 Bitcoin Strategic Reserve Act" is undoubtedly an unprecedented attempt and a reflection of the modernization of the financial system. With some states passing "Bitcoin Rights" legislation, the introduction of this strategic reserve act seems logical and has far-reaching implications. Related organizations, as advocates of Bitcoin, are trying to promote the application of Bitcoin in broader areas through such legislation, providing legislators with a perspective to understand blockchain technology and helping them seize opportunities in the digital age during the policy-making process.

In order to address the risks associated with the significant volatility of Bitcoin, the draft proposes several risk control measures:

• Investment limit: The state's financial investment in Bitcoin shall not exceed 10% of the total amount of the relevant funds, in order to prevent excessive reliance on a single asset.
• Asset Lending: Without increasing financial risk, state finances can obtain additional income by lending Bitcoin, but they must follow the rules set by state financial officials.
• Diversified investment strategy: Encourage state governments to continue investing in other traditional financial assets while introducing Bitcoin, to ensure the stability of the overall investment portfolio.

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

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