Will the Government Get into Crypto’s Business in 2025?

After a huge year in 2024, the landscape for cryptocurrencies could change dramatically over the next several months.

Crypto’s standard bearer Bitcoin increased 150% in 2024 while the aggregate value of all digital currencies nearly doubled to $3.3 trillion, fueled by the launch of exchange-traded funds for Bitcoin.

And while there has been a lot of talk regarding regulation of digital currencies – and the Bitcoin ETF’s are subject to Securities and Exchange Commission oversight – the government may be less focused on getting in crypto’s business and move to get into the crypto business itself.

In July of last year, Wyoming Sen. Cynthia Lummis sponsored the ambitiously titled Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide or BITCOIN Act.

The bill would create a “strategic Bitcoin reserve,” not unlike the nation’s strategic oil reserve, “as an additional store of value to bolster America’s balance sheet” among other lofty financial goals.

Logistically, the legislation would require the creation of a network of “secure Bitcoin vaults” operated by the U.S. Treasury and kick off a 1-million-unit Bitcoin purchase program with the aim of acquiring 5% of the total Bitcoin supply “mirroring the size and scope of gold reserves held by the United States.”

Exactly how this digital Fort Knox would work is unclear. But what is clear is the shift from simple government regulation to a peculiar mix of oversight and active participation, almost as if the umpires decided to field their own baseball team.

The decentralized and fundamentally unregulated nature of the cryptocurrency world is one of its biggest draws. Freed from the stifling hand of regulatory regimes, digital currencies are subject only to the market, at least in theory. Maintaining that perception will be harder to do if governments become active participants in the crypto ecosystem.

That isn’t even the biggest red flag in the idea to create a national Bitcoin reserve. First and foremost, Bitcoin isn’t the only game in town, but a government-sponsored Bitcoin reserve is an implicit acknowledgement of that particular cryptocurrency as “official.” As governments consider creating their own central bank digital currencies – a digital version of a traditional currency – Bitcoin becomes a competing crypto asset.

Beyond the free-market economy debate is the issue of the federal government placing public funds in a system that is still widely considered an investment rather than “real” money. It is worth noting the Internal Revenue Service considers digital assets property rather than currency for tax purposes.

Digital currencies are the future of money – that is inescapable. In our frenzy to digitize everything, it was only a matter of time before it happened to dollar bills and buffalo nickels. But what makes money work, the real idea of “legal tender” is a currency backed with the full faith and credit of the nation. We’ve come a long way with cryptocurrency, but we aren’t there yet.