The Rise of BTC As a Governmental Reserve & How it Rewrites The Global Balance Sheet
Bitcoin, known as "digital gold," is rapidly evolving from a speculative asset to a key contender for global strategic reserves. Its scarcity, decentralisation, and low storage costs make it an attractive alternative to traditional assets like gold and fiat currencies. Governments, corporations, and institutions are driving adoption, with examples like El Salvador’s daily purchases and MicroStrategy’s aggressive accumulation. Supported by platforms like OSL offering secure custody and seamless trading, Bitcoin is poised to reshape global finance, challenging traditional reserve systems and redefining the future of asset management.
What Does 1 Million Bitcoins Mean?
To put this into perspective, let's take a look at the gold at the U.S. Federal Reserve. As of Q3 2024, there is 8,133.46 tons of gold, worth approximately US$538 billion. A reserve of 1 million Bitcoins, currently valued at $100 billion, would equate to 19% of the US gold reserve. Just as Trump, and increasingly institutions begin to consider conceptualising a "Bitcoin strategic reserve", imminence of the token's "Fort Knox moment" takes another step toward reality? The next ten years will be key to revealing a solid answer to this question.
The Growing Interest in Bitcoin as a Reserve Asset
At the 2024 Bitcoin Conference, Trump promised during his public speech, that he would never sell bitcoin that the US government currently holds or acquires in the future, very much in the spirit and definition of a Bitcoin strategic reserve. Now that Trump is president-elect, and with the recent appointment of a series of pro-crypto figureheads such as the new Chairman of the SEC and Whitehouse's Crypto Tzar, the US takes another step toward establishing its Bitcoin strategic reserve.
So What is a Strategic Reserve?
Strategic reserve asset is a critical asset held by national or regional governments in order to hedge against economic fluctuations, financial crises or geopolitical risks. These assets aim to maintain financial stability, economic security and international competitiveness. They typically are high in value, have widespread acceptance, are secure and stable and have plentiful liquidity.At the corporate level, "strategic reserve" helps businesses and institutions achieve financial stability, enhance risk tolerance and support long-term growth strategies. During periods of economic uncertainty, strategic reserve often serves as the first line of defence. For example, Bitcoin is an excellent hedge against inflation, compared to depreciating fiat currencies, directly protecting a company's asset value.
Traditional Strategic Reserve Includes the Following Assets
Gold: widely regarded as a stable store of value due to its scarcity and resistance to inflation
Foreign currency: primarily consisting of the US dollar. These currencies are crucial for supporting international trade and payments
Special Drawing Rights (SDR): allocated by the International Monetary Fund (IMF) to supplement the official reserves of member countries
This means that assets considered for "strategic reserves" typically possess a combination of values: stability, global recognition and ease of circulation. As a new digital asset, Bitcoin is rapidly meeting these criteria and is emerging as a potential alternative to gold.
Notably, beyond Trump’s promise during his speech, on July 31, 2024, US Senator Cynthia Lummis introduced the Bitcoin Act of 2024. This act proposes that the US acquire 1 million Bitcoin over a five-year period and establish it as part of its Strategic Bitcoin Reserve. The token would be held for at least 20 years, and any net proceeds generated from its sale would be used to purchase additional Bitcoin, unless they are utilised to repay outstanding federal debt.
The plan aims to ensure that the US government holds a substantial amount of Bitcoin over the next two decades, providing a long-term financial hedge. The bill has already been submitted to the US Senate Banking Committee and Office of Urban Affairs for discussion and polling before being submitted to President-elect Trump to be signed into law.
Why Bitcoin? And Not Gold or Foreign Currency?
To a certain extent, the quantity of gold reserves isn't the necessarily a case of the more the merrier. As a physical asset, gold doesn't generate interest or income and lacks material returns. Warren Buffett famously said that gold doesn't pay you interest and therefore has no compounding effect.
More importantly, maintaining gold reserves incurs significant storage and upkeep costs. For most countries, effectively managing and protecting gold reserves poses a substantial fiscal burden. Take for example, the renowned Fort Knox, the US Federal Reserve's primary gold storage facility requires a massive allocation of resources to maintain. Located deep in Kentucky, within the strategic heat of the US, Fort Knox is not only buried underground but also surrounded by reinforced walls and 24/7 security systems. Moreover, tens of thousands of soldiers are permanently stationed there. This makes gold storage not just a matter of security but also a long-term financial commitment.
Compared to gold, the storage cost of Bitcoin is negligible. It requires no physical storage space or expensive protective infrastructure. Instead, secure wallets, multi-factor authentication technology, and decentralised network verification are sufficient for efficient storage and management.
On the national level, Bitcoin's storage costs are primarily related to technology and network maintenance, which are significantly lower than the physical protection costs of gold. This means that even without generating direct returns, Bitcoin's storage cost remains much lower than gold, leaving more headroom for net asset growth.
Additionally, trading physical gold often involves complex processes such as delivery, storage, and transportation, which can take days or even weeks. Gold markets are also constrained by trading hours and geographic limitations of traditional financial systems. In contrast, Bitcoin can be traded globally on exchanges 24/7, offering unmatched accessibility.
Unlike gold, foreign exchange reserves (e.g., euros, yen) are fiat currencies issued by other countries. Their value depends on the issuing nation's economic stability and can be affected by geopolitical risks. Bitcoin, on the other hand, is scarce and immune to monetary policy interventions, avoiding risks such as devaluation caused by over-issuance. This enables all holders—whether individuals, institutions, or sovereign states to store, transfer, and trade it freely across the globe.
This decentralised nature ensures Bitcoin is not subject to political or economic interference. Even during global instability, it retains its functionality as a reliable store of value.
Comparison of Bitcoin, Gold, and Foreign Exchange Reserves
Governments and Corporations Embrace Bitcoin as a Strategic Reserve Asset
With a market capitalisation now exceeding $2 trillion, Bitcoin is gaining recognition as a promising reserve asset. Its lack of physical storage requirements, global accessibility, transparency, and resistance to inflation have made it an attractive option. Increasingly, companies, institutions, and even sovereign nations are exploring Bitcoin as part of their strategic reserve portfolios.
The U.S. Government: One of the World’s Largest Bitcoin Holders
Surprisingly, the U.S. government is one of the largest holders of Bitcoin worldwide. Over the years, it has confiscated substantial amounts of Bitcoin through law enforcement against cybercriminals, money laundering networks, and the dark web. Currently, it retains approximately 200,000 Bitcoins, worth around $20 billion as of writing.Under President-elect Trump's upcoming tenure, often regarded to be "the most crypto-friendly president in U.S. history", it remains as yet uncertain whether Bitcoin will be formally incorporated into the federal reserve system in the future. However, one thing is clear: the U.S. government is likely to hold onto its Bitcoin for the foreseeable future, shifting focus from frequent sell-offs to exploring the long-term strategic value of these holdings.
El Salvador: 1 Bitcoin a Day
First country in the world to adopt Bitcoin as legal tender, enacting the legislation since September 7, 2021. The government took this further and released an official commission-free Bitcoin wallet, pre-loaded with US$30 worth of Bitcoin, in order to integrate it into the economy and bolster their strategy.As for public communications, President Nayib Bukele Ortez consistently uses social media to announce Bitcoin purchases, building trust and awareness amongst the nation toward the strategy. The government continues to buy 1 Bitcoin to this day, taking advantage of dips to accumulate the asset at advantageous price points. As of December 10, 2024, the country's holdings stand at 5,959.99 BTC, with a market value of approximately US$577 million.While this holding is modest on a global scale, El Salvador’s steadfast Bitcoin strategy is noteworthy. As a small economy, its bold experiment serves as an intriguing case study for other nations considering similar moves.
MicroStrategy: All-in on Bitcoin
Among the many entities investing in Bitcoin, MicroStrategy stands out as a dominant player in the corporate world. Its aggressive "buy and hold" strategy has led it to accumulate more Bitcoin than any known sovereign nation.MicroStrategy’s Bitcoin acquisition journey began on August 11, 2020, when it announced the purchase of 21,454 BTC for $250 million, at an average price of $11,652 per Bitcoin. Since then, the company has continued to add to its holdings. Its most recent purchase, disclosed on December 9, 2024, involved acquiring 21,550 BTC for $2.1 billion, with an average price of $98,783 per Bitcoin.As of December 8, 2024, MicroStrategy had acquired 423,650 BTC at a total cost of $25.6 billion, with an average purchase price of $60,324 per Bitcoin. Despite Bitcoin’s current price of $97,000, the company reports an unrealised loss of approximately $15.5 billion.
Tesla: a Strategic "Hodler" of Bitcoin
On December 20, 2020, following MicroStrategy CEO Michael Saylor’s call for other CEOs to adopt Bitcoin, Elon Musk expressed his interest in the cryptocurrency. By late January 2021, Musk updated his Twitter bio to include "#Bitcoin," and shortly after, Tesla announced a $1.5 billion Bitcoin purchase in February 2021.In the first quarter of 2021, Tesla sold 10% of its Bitcoin holdings to "test liquidity," as Musk explained, proving Bitcoin’s viability as a cash substitute on the company’s balance sheet.According to Arkham Intelligence, Tesla currently holds 11,509 BTC, valued at around $1.1 billion. This strategic reserve highlights Tesla’s continued commitment to Bitcoin as a long-term asset.
Bitcoin As A Strategic Reserve Entering Mainstream Adoption
Bitcoin's strategic value is steadily extending beyond national reserves to corporations and institutions. While nations play a role in shaping the regulatory environment, businesses are at the forefront of Bitcoin adoption. Increasingly, Bitcoin is seen not only as a hedge against risk but also as a core component of corporate balance sheets. Recently, tech giants like Microsoft and Amazon have faced growing pressure from investors to add Bitcoin to their balance sheets. MicroStrategy founder Michael Saylor has directly urged Microsoft's board to invest in Bitcoin, arguing that doing so could significantly enhance corporate value and generate long-term returns for shareholders. Similarly, the conservative think tank National Center for Public Policy Research has proposed that Amazon invest 1% of its total assets in Bitcoin to boost shareholder value and hedge against currency devaluation.
Advantages for Corporations Adding Bitcoin to Their Balance Sheets
Inflation Hedge: Bitcoin’s fixed supply of 21 million coins offers strong resistance to inflation, helping companies preserve asset value in an environment of monetary easing and fiat currency depreciation.
Portfolio Diversification: As an emerging asset class, Bitcoin provides diversification opportunities, reducing reliance on single asset types and strengthening overall financial stability.
Enhanced Brand and Market Image: Holding Bitcoin reflects a company’s support for innovation and future economic models, improving competitiveness and fostering a forward-thinking brand identity.
Challenges for Businesses Adopting Bitcoin
Despite its benefits, companies must address two critical challenges when adding Bitcoin to their balance sheets:
Secure Custody of Large Assets
Professional custodial services are vital. For instance, OSL, Hong Kong's first licensed exchange, offers tailored solutions such as individual wallet designs for each client, protected under bankruptcy-remote trust structures to ensure the absolute security of Bitcoin holdings.
Efficient Over-the-Counter (OTC) Transactions
To avoid market disruption, efficient OTC services are crucial. OSL, as a licensed and regulated platform, collaborates closely with major Hong Kong banks to provide near-instant fiat settlements. Strict protocols for deposits and withdrawals further minimise the risk of frozen bank accounts.
Enhanced Security and Insurance
OSL has partnered with top-tier insurance provider Canopius to expand coverage to $1 billion. This policy protects against a range of risks, including cyberattacks, fraud, and technical failures, offering clients unparalleled peace of mind. Through integrating advanced custodial and OTC solutions, institutions and corporations can confidently incorporate Bitcoin into their balance sheets, leveraging its strategic value while mitigating operational risks.
Bitcoin’s Future as a Strategic Reserve: How OSL Leads the Way
Bitcoin has transformed from a marginal asset to a serious contender as a global strategic reserve. Its scarcity, decentralisation, and transparency have earned it the title of "digital gold." Unlike gold, which relies on complex logistics for storage and trade, Bitcoin’s blockchain enables seamless, borderless transactions, making it highly suitable for modern reserve strategies.
Institutions and corporations can seamlessly integrate Bitcoin into their reserves with the confidence that their assets are secure and accessible. With OSL, clients benefit from peace of mind knowing their holdings are protected through secure custody solutions, where assets are fully segregated (kept completely separate from others), ensuring unparalleled safety. High-volume transactions are executed smoothly without disrupting markets, thanks to OSL’s efficient OTC trading services. Additionally, comprehensive insurance coverage protects assets against cyberattacks, fraud, and technical failures, allowing users to focus on maximizing the strategic potential of their Bitcoin reserves. As Hong Kong’s first licensed and listed exchange, OSL empowers users to bridge the gap between traditional finance and digital assets, unlocking new strategies and opportunities with reliability and ease.