What are Bitcoin Reserves?

Bitcoin reserves refer to the holding of a certain amount of Bitcoin within a country’s foreign exchange reserves or asset portfolio. This is similar to the traditional practice of holding reserves in forms such as gold, foreign currencies, or other assets, to enhance economic stability, improving international trade standing, or safeguarding against financial crises. Bitcoin reserves can be acquired through purchases, mining, or seizing illicit funds.

Many countries worldwide have proposed including Bitcoin in their national reserve assets. For example, Donald Trump, when elected as the President of the United States, promised to include Bitcoin as a strategic reserve asset. With Trump’s administration and the crypto-friendly stance in U.S. politics, the possibility of this idea becoming a reality has significantly increased. María Corina Machado, the leader of Venezuela’s opposition, also proposed establishing a national Bitcoin reserve system in the latter half of this year, stating that Bitcoin is a “key component” in rebuilding Venezuela’s economy and financial system.

Which Countries Hold Bitcoin Reserves

The governments of countries such as the United States, China, the United Kingdom, Ukraine, Bhutan, El Salvador, Venezuela, and Finland hold certain amounts of Bitcoin.

Some countries hold Bitcoin as part of their strategic reserves, while others have acquired it through forfeitures. Additionally, due to recent policy shifts and the President’s stance on Bitcoin, countries like the United States may convert previously forfeited Bitcoin into strategic reserves. The policies and holdings of these countries can influence Bitcoin’s market dynamics, so an introduction will follow based on the order of their holdings.

United States

Changes in U.S. Government Bitcoin Holdings

The U.S. government currently holds approximately 198,109 Bitcoins, valued at around $19.4 billion. These Bitcoins were primarily acquired through law enforcement actions and asset seizures related to illegal activities. This includes 174,000 Bitcoins seized by the FBI in 2013 during the shutdown of the infamous dark web platform “Silk Road,” as well as around 94,636 Bitcoins recovered by the U.S. Department of Justice in 2022 following the Bitfinex exchange hack, along with other forfeited assets. Before Trump’s statements on Bitcoin reserves, these Bitcoins were considered seized assets rather than potential strategic reserves.

On July 8, 2024, during his campaign preheating, Trump stated at the Bitcoin conference that if elected in November, he would fire SEC Chairman Gary Gensler and prevent the U.S. from selling its Bitcoin holdings, aiming to establish a “strategic Bitcoin reserve.”

Once Trump officially assumes office, it is highly likely that the U.S. government will adopt a HODL (hold) strategy for its Bitcoin holdings, refraining from selling Bitcoin throughout his entire term.

China

Changes in China’s Government Bitcoin Holdings

In China, Bitcoin has primarily been involved in judicial asset disposals. In numerous cases of virtual currency asset freezing and confiscation, law enforcement agencies have investigated illicit funds and money laundering, including the freezing and seizure of Bitcoin. Although there has been no public record of these seized Bitcoins, some judicial cases suggest that government departments may need to hold crypto assets under specific circumstances.

Currently, the Chinese government holds approximately 190,000 Bitcoins, a quantity comparable to that held by the U.S. government. China’s overall stance on Bitcoin is one of strong restriction, to maintain financial stability, protect investors, and achieving environmental goals. While the government has not fully denied Bitcoin’s asset properties and technological value, it focuses on leveraging blockchain technology to advance the legal digital economy, such as promoting the digital yuan. However, the Chinese government does not want any asset to dilute or replace the yuan.

Therefore, China is the most resistant country to Bitcoin among those that hold it, and it is highly likely to create potential selling pressure on Bitcoin for a long period of time in the future.

United Kingdom

UK Government Bitcoin Holdings Changes

The Bitcoin held by the UK government primarily comes from efforts to combat cybercrime, illegal fundraising, dark web transactions, financial crimes, and tax evasion. These Bitcoins are generally considered illicit proceeds. This includes Bitcoins seized from various dark web and high-yield investment scams (such as “Get Rich Quick” schemes). Currently, the UK government holds 61,245 Bitcoins, valued at around $6 billion.

The UK government’s stance on Bitcoin is one of cautious openness. On the one hand, it supports the development of Bitcoin and blockchain technology to reinforce its leadership in the global fintech sector; on the other hand, it enforces strict regulations to protect consumers and prevent Bitcoin’s use in crime and money laundering. With the U.S. government continuing to loosen its crypto policies, it’s possible that the UK government may follow suit. However, it’s important to note that the UK Treasury has faced significant deficits in recent years, and without a clear stance from the government in support of cryptocurrency, it’s possible that the UK government may sell its Bitcoin holdings to supplement the national treasury.

Ukraine

Ukraine Government Bitcoin Holdings Changes

The Bitcoin the Ukrainian government holds primarily comes from cryptocurrency donations and assets seized during law enforcement actions against illegal activities. After the outbreak of the Russia-Ukraine conflict in 2022, Ukraine received a significant amount of cryptocurrency donations from around the world, with Bitcoin being one of the main forms. These donations became an important source of the Ukrainian government’s Bitcoin holdings. Following the conflict’s onset, the Ukrainian government published several cryptocurrency wallet addresses on official social media, accepting Bitcoin, Ethereum, and other cryptocurrencies. These Bitcoins were used to fund the military, defense infrastructure, medical supplies, and other emergency needs.

According to blockchain tracking company Elliptic, Ukraine received over $100 million in cryptocurrency donations during the early stages of the conflict, a significant portion of which was in Bitcoin.

The Ukrainian government’s Bitcoin holdings are largely intended for war efforts, but its stance on Bitcoin remains unclear. At some point, these holdings could potentially become a source of selling pressure. The Ukrainian government currently holds 46,351 Bitcoins, valued at approximately $4 billion.

Bhutan

Bhutan Government Bitcoin Holdings Changes

Bhutan’s national investment institution, Druk Holdings, has been mining Bitcoin since 2019 using its hydropower resources. It currently holds nearly 12,000 Bitcoins, valued at approximately $1.1 billion.

According to data from Arkham, the Bhutanese government mines Bitcoin through multiple mining pools, including AntPool, Braiins, and Foundry. Based on known government holdings, Bhutan ranks as the fifth-largest holder of Bitcoin, following the U.S., China, the UK, and Ukraine.

This holding volume is quite impressive. When calculated against Bhutan’s 2022 GDP of $2.89 billion, the value of Bitcoins exceeds a third of the country’s GDP.

Unlike most governments that acquire Bitcoin through asset seizures, Bhutan’s Bitcoin holdings come from its active participation in Bitcoin mining. Previous reports have highlighted that Bhutan holds one of the world’s largest hydropower reserves, providing a significant advantage for its Bitcoin mining activities. Bhutanese government representatives have revealed that the country began mining Bitcoin “a few years ago when the price was around $5,000 per Bitcoin,” making Bhutan one of the early entrants. Therefore, the Bhutanese government is an active Bitcoin holder, with Bitcoin serving as an important strategic reserve asset that is unlikely to be sold easily.

El Salvador

El Salvador Government Bitcoin Holdings Changes

The El Salvador government’s Bitcoin holdings mainly come from direct purchases and the policy benefits of using Bitcoin as legal tender. Similar to Bhutan, El Salvador, as a developing country, actively increased its national Bitcoin holdings. Unlike developed countries that acquire Bitcoin through asset forfeiture, the primary reason for El Salvador’s Bitcoin holdings is to stabilize the exchange rate, even though Bitcoin’s volatility as an asset is greater than that of traditional assets. For countries like Bhutan, El Salvador, and Venezuela, such a decentralized token is useful for stabilizing their domestic payment methods. \
El Salvador became the first country in the world to adopt Bitcoin as legal tender. This historic decision came into effect in 2021, marking an important milestone in the cryptocurrency sector.

On June 5, 2021, El Salvador President Nayib Bukele announced at the Bitcoin Conference in Miami that the government planned to introduce legislation to make Bitcoin the country’s legal tender. On June 8, the proposal was submitted to the National Assembly, where it was passed with 62 votes in favor and 22 votes against. The main provisions of the proposal included:

• Bitcoin would be recognized as legal tender alongside the U.S. dollar.
• Businesses would be required to accept Bitcoin as a payment method, though exceptions would be made for those lacking the necessary technology.
• The El Salvador government would manage the risks associated with converting Bitcoin to dollars through a dedicated trust fund.

The proposal was officially implemented on August 7, 2021. Afterward, the government launched a digital wallet called “Chivo,” which was provided free of charge to citizens, along with a $30 Bitcoin incentive. More than 200 Bitcoin ATMs were established nationwide, and multiple “Chivo Centers” were set up to offer technical support.

El Salvador’s decision to adopt Bitcoin as legal tender is primarily driven by economics, finance, and technology considerations. The core reasons are as follows:

• Enhancing Financial Inclusion: Approximately 70% of El Salvador’s population lacks access to bank accounts and basic financial services. Bitcoin enables transactions with just a smartphone and internet, providing an opportunity for those excluded from traditional banking systems to participate in financial activities.
• Reducing Remittance Costs: Bitcoin transactions allow for fast and low-cost cross-border transfers, significantly reducing intermediary fees.
• Attracting Foreign Investment and Technological Innovation: By becoming the first country in the world to adopt Bitcoin as legal tender, El Salvador aims to attract businesses and investors from the cryptocurrency sector, positioning itself as a hub for digital economic development.
• Countering Economic Dependence on the U.S. Dollar: El Salvador adopted the U.S. dollar as its official currency in 2001 due to the limited strength of its national currency, making its monetary policy entirely dependent on the U.S. dollar. Introducing Bitcoin as a legal tender provides more flexibility and reduces the country’s dependency on the dollar.
• Long-Term Economic Benefits: The Salvadoran government believes that Bitcoin’s scarcity (with a total supply of 21 million) could make it a significant store of value in the future. If Bitcoin’s price increases over time, the country’s Bitcoin holdings could generate substantial economic returns.

The Salvadoran government currently holds 6,006 Bitcoins, valued at approximately $0.59 billion. With Bitcoin’s recent price surge to around $100,000, El Salvador has gained significant unrealized profits from its active holding policy. Therefore, the government will likely continue its bullish stance on Bitcoin, maintaining and expanding its holdings. Additionally, El Salvador is an active promoter of blockchain projects, with initiatives such as the Volcano Bitcoin Mining Facility and Bitcoin City already established.

Venezuela

Venezuela Government Bitcoin Holdings Changes

The Venezuelan government has increased its Bitcoin holdings through active purchases and mining operations. The country’s official currency, the bolívar, has experienced an annual depreciation rate of 2,000%–3,000%, making it one of the fastest-depreciating fiat currencies globally. This situation has driven the Venezuelan government to seek a stable currency for payments urgently or to anchor the local currency. As a result, the government has turned its focus to Bitcoin, increasing domestic Bitcoin mining activities and actively building spot positions in the cryptocurrency.

However, the Venezuelan government seems unwilling to rely solely on Bitcoin to alleviate payment pressures. Recently, it launched the cryptocurrency “Petro” as the country’s latest legal tender, intending to replace Bitcoin. The government hopes to enjoy the payment stability offered by decentralized tokens while also creating a new token to generate speculative effects.

In conclusion, the Venezuelan government’s attitude towards Bitcoin holdings is complex. While the Petro is not yet widely recognized by the international community, Venezuela still relies on Bitcoin to stabilize domestic payments. Therefore, the government will likely continue to hold Bitcoin in the short term. However, in the context of rising Bitcoin prices and the growing speculation surrounding altcoins, Venezuela may push for the use of Petro to arbitrage, which would likely dilute its Bitcoin holdings.

Finland and Germany

Finland Government Bitcoin Holdings Changes

Germany Government Bitcoin Holdings Changes

Finland holds a small amount of Bitcoin, and Germany has already liquidated its Bitcoin positions. The Bitcoin reserves in both countries primarily stem from asset forfeitures. Both countries are part of the Eurozone, with a unified monetary policy framework. For the centralized fiat currency, the euro, Bitcoin represents a significant competitor. Additionally, the major blockchain companies are not currently based in Europe, so there is no immediate political need for the countries to be aligned with Bitcoin. The focus is more on domestic fiscal needs.

Thus, for Finland, Germany, and the UK mentioned earlier, regardless of the amount of Bitcoin held, the ultimate goal is to serve domestic fiscal needs. The likelihood of Bitcoin being sold off to meet financial requirements is high, it’s just a matter of when it will occur.

Which Types of Countries Will Start Holding Bitcoin Reserves

From the countries that hold Bitcoin discussed above, it is clear that they fall into two main categories: one is countries with passive holdings through forfeiture, and in this group, almost all except for the United States are likely to bring potential selling pressure in the future; the other category is countries that actively increase their holdings, and these are mostly third-world countries. The intention behind holding Bitcoin in these countries is generally to stabilize exchange rates and driven by speculative behavior.

Currently, blockchain projects are mostly based in the United States, while individual investors are distributed globally. New forfeiture events will continue to occur in the coming years, and the number of countries with passive holdings will increase. On the other hand, third-world countries, especially those with severe currency devaluation, will actively use Bitcoin holdings to alleviate domestic payment depreciation.

The news about the new president of Argentina supporting cryptocurrency.

Recently, the newly elected president of Argentina, like Trump, is a supporter of cryptocurrency, and Argentina is also facing severe depreciation of its fiat currency. The country will likely follow the example of Venezuela, El Salvador, and other countries.

The exchange rate of the Argentine peso to the US dollar.

But ironically, the countries that actively increase their positions to support Bitcoin, or spend large amounts of money to purchase Bitcoin, still hold fewer coins than those acquired through asset forfeiture by developed countries. El Salvador and Venezuela are more like large cryptocurrency retail investors. Even though the cost of Bitcoin investment is lower, they are still pressured by the chips of forfeiture-heavy countries like the US and China.

Conclusion

The above text introduces the countries that hold Bitcoin, their attitudes toward Bitcoin, and the reasons for holding it. Passive holdings through asset forfeiture and active holdings through purchases and mining are the two main methods of holding Bitcoin. Countries with forfeited assets are more likely to play the role of potential sellers in the future, while those that actively increase their positions are considered Hodlers. However, this is merely a simple economic behavior logic. Just as different spot traders in the market compete against each other, there is also subtle competition between major countries in the cryptocurrency field. This may explain why Germany, a country focused on forfeiture, chose to liquidate its Bitcoin holdings, while China continues to hold theirs. There must be a deeper competitive logic behind this, which will reshape the different stages at which countries’ Bitcoin holdings either create selling pressure or act as holders. When more retail investors are in a market, the major players with large positions are unlikely to exit easily!