Yesterday, in a move that has sparked plenty of controversy, President Trump revealed the much-anticipated Strategic “Bitcoin” Reserve through Truth Social. The announcement has left many in the cryptocurrency community feeling frustrated.
To begin with, the Reserve appears to be far from Bitcoin-exclusive. David Z. Morris, a former Chief Insights Columnist at CoinDesk, took to X to express his concerns, noting that Charles Hoskinson’s Cardano (ADA) is set to be included. Some suggest this approach is akin to diverting funds from essential areas like cancer research to promote Cardano.
Critics have also raised alarms over potential conflicts of interest tied to the Trump administration’s announcement. Communications strategist Derek Martin criticized it as “a new level of corruption,” citing David Sack’s previous investment in Bitwise. Meanwhile, Troy Cross from the Bitcoin Policy Institute made a cheeky comparison to Oprah, implying everyone is getting an exit strategy. It’s worth noting that Sacks has since clarified that he’s divested from his cryptocurrency assets.
The focus of these critiques seems to miss the primary concern. The composition of the Reserve or any underlying motives behind the administration have less impact on Bitcoin holders than one might think.
The more critical question is about how the Reserve will actually be funded. Speculation is rife that the U.S. government might tap into taxpayer money to acquire cryptocurrency— a move requiring Congressional approval and seen as improbable given the buzz about a potential new announcement from Trump regarding ‘investments.’
A more feasible strategy, outlined in Trump’s Executive Order aimed at bolstering American leadership in digital financial technology, suggests the Reserve might be “derived from cryptocurrencies lawfully seized by the Federal Government through its law enforcement efforts.”
While that might sound fine to most law-abiding Bitcoin owners, the reality is more complex. The “lawful seizure” part doesn’t just involve cryptocurrency acquired through criminal prosecution. Civil Asset Forfeiture allows the government to seize property without charging the owner with a crime, merely by accusing the asset itself of illegality.
The Cato Institute has highlighted various abuses of this practice. In New York, cars are seized for DUIs, and in Florida, police often confiscate cash above $100, suspecting it might be for drug purchases. Perhaps the most egregious case involved law enforcement in Philadelphia trying to seize a grandmother’s home and car because her son, unbeknownst to her, sold a small amount of marijuana from her property. Over eleven years, Philadelphia’s misuse of civil asset forfeiture led to the confiscation of more than 1,000 homes, 3,000 vehicles, and over $44 million in cash.
The fundamental issue with civil asset forfeiture is that it shifts the burden of proof. Instead of proving guilt, asset owners must prove their property’s innocence, making legal battles both expensive and difficult.
Though the government has precedent for applying civil asset forfeiture to cryptocurrencies, traditionally, there was no strategic benefit since seized Bitcoin would ultimately be sold for dollars. However, under Trump’s Executive Order, this could change as the government might have newfound incentive to apply this practice more widely to Bitcoin.
This could pose significant problems, as much Bitcoin can be traced back to transactions potentially linked to sanctions evasion or darknet markets. The challenge becomes determining how far back one should trace such transactions to justify government seizure.
Moreover, should the government suspect your Bitcoin is tied to illegal activity, they can legally confiscate it—even if you acquired it through legal means, had no involvement in any crime, and were unaware of its history.
In light of these potential implications, cautiously endorsing the Strategic Bitcoin Reserve might be wise. It’s essential to seek assurances that civil asset forfeiture won’t be abused to enhance the Reserve. After all, rather than being bolstered, this controversial practice should be under reform.
This article is hosted by L0la L33tz. Opinions stated here belong solely to the author and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
