Yesterday, President Trump announced the long awaited Strategic “Bitcoin” Reserve on Truth Social, and many in the space are pissed.First, the Reserve appears to be far from Bitcoin only. “They’re doing DEI for Charles Hoskinson,” former CoinDesk Chief Insights Columnist David Z. Morris wrote on X – Hoskinson’s Cardano (ADA) was announced to be included in the Reserve. “Cut cancer research to buy Cardano,“ another user posted. Others take issue with possible investment interests surrounding the Trump administration: Trump’s announcement is “a new level of corruption,” wrote communications strategist Derek Martin, detailing David Sack’s investment in Bitwise. “You get exit liquidity and you get exit liquidity everybody gets exit liquidity” posted Bitcoin Policy Institute fellow Troy Cross alongside a picture of Oprah. (Sacks has since stated that he has sold all of his cryptocurrency holdings).What all of these criticisms have in common is that they completely miss the point. Whether the Reserve is composed of additional coins, or may serve nefarious interests of the administration, is of little actual consequence for those holding Bitcoin.What is very much of consequence, is the question of how said Reserve would be funded. On the one hand, many are speculating that the US may divert taxpayer funds to purchase cryptocurrency – a proposal that inevitably would have to go through Congress – which seems unlikely, as Trump is rumoured to make a new announcement on ‘investments’ today.Another, much more likely approach, as already outlined in Trump’s Executive Order to “Strengthen American Leadership in Digital Financial Technology”, is that the Reserve would be “derived from cryptocurrencies lawfully seized by the Federal Government through its law enforcement efforts.”That’s fine, you’ll say, because I’ve obtained all of my bitcoin legally and have never, nor will I ever, engage in criminal activity. And that’s precisely where you are wrong.Bitcoin that is “lawfully seized by the Federal Government” does not just include bitcoin derived through criminal prosecutions. Bitcoin can additionally be lawfully seized through a process called Civil Asset Forfeiture: a funny little game that the Government plays in which it doesn’t have to accuse you of a crime, but can instead accuse the thing itself of a crime. As Cato Institute has outlined in a post calling for the reform of Civil Asset Forfeiture law, New York police routinely seize cars used in a DUI, and in Florida, police regularly seize cash excess of $100 suspected to be used to purchase illegal substances. In the most striking example, Cato highlights a case from Philadelphia, in which police tried to seize a grandmother’s house and car because, without her knowledge, her son sold less than $200 worth of marijuana from the house. In Philadelphia alone, civil asset forfeiture was so astonishingly abused, that the City seized over 1,0
The relationship between Bitcoin reserves and the motivations behind civil asset forfeiture.
