Bitcoin Reserve Prospects Limited Under Trump Administration - Compass Point Research

The prospects for a proposed strategic Bitcoin reserve under Donald Trump's administration are limited, Compass Point Research said in a note, citing potential regulatory and fiscal hurdles.

A proposed Donald Trump administration plan to create a strategic Bitcoin reserve faces limited prospects due to potential regulatory and fiscal hurdles, according to a note from Compass Point Research on Friday.

The recently introduced BITCOIN Act, which calls on the Treasury to accumulate the cryptocurrency, is also seen as unlikely to become law, the brokerage said in the note to clients.

While Trump could sign an executive order for the Treasury to establish a Bitcoin strategic reserve, a future administration could easily rescind the order, according to Compass Point.

This would make the Bitcoin reserve different from other government reserves, such as the strategic petroleum reserve, which were formed by legislation passed through Congress, the note said.

Moreover, the Treasury has no Congressional authorization to use government funds to acquire Bitcoin, and it seems unlikely that a Republican controlled Congress, which is aiming to reduce fiscal spending, will approve funds for this purpose, according to the brokerage.

An elevated Federal deficit also means that the government does not have additional deficit funding it can deploy to purchase Bitcoin, the note said.

Government agencies will have to use discretionary funds to buy Bitcoin, which are severely limited in scope, according to Compass Point.

The BITCOIN Act, which was proposed by Senator Cynthia Lummis, calls on the Treasury to deficit finance the purchase of 1 million Bitcoin over five years, and is likely to be a “nonstarter,” the brokerage said.

The brokerage sees a less than 10% chance the act will become law before 2026.

Bitcoin has rallied to record highs for the past three weeks on heightened expectations that Trump will dole out more crypto-friendly regulations. The coin stopped just shy of $100,000.

But crypto markets have seen some easing in recent sessions, as traders await more tangible cues on policy from Trump.