The Strategic Bitcoin Reserve Debate: A Modern Bretton Woods

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G Clay Miller is a seasoned digital asset entrepreneur and activist based in Brooklyn, NY. He is a Partner at Penrose – a leading digital asset advisory and investment firm – where he has consulted organizations including Coinbase, NEAR, Algorand, 3iQ Corp, the Government of Bermuda, and more. He is also an elected Brooklyn County Committee Member, representing the 54th Electoral District in Bushwick. G holds an MSc in Public Policy and Administration from the London School of Economics and Political Science, a BA in Political Science & International Development from McGill University, and is a certified blockchain expert by the Blockchain Council.

A Global Prisoner’s Dilemma in the Digital Asset Era

A global debate has emerged around the value of a Strategic Bitcoin Reserve. As nations race to decide whether to accumulate Bitcoin, policymakers need tools and frameworks to evaluate their options. Using an international relations and game theory perspective, I argue that if you believe that digital assets will continue to play an increasing role in the global economy, then you should support the United States creating one of the world’s first Strategic Bitcoin Reserves (SBR).

This is not an argument for whether a SBR is inherently good or bad – I do not take a position in that debate. Rather, this is an argument that failing to consider Bitcoin’s strategic role in monetary policy leaves the U.S. vulnerable in a shifting global economy. And, to be clear, I believe that other fundamental crypto policy objectives should take priority over a SBR – particularly around market structure, stablecoins, and fostering digital asset innovation within the U.S. While Bitcoin as a strategic reserve asset is the hot topic of the day, the bigger opportunity lies in ensuring that the U.S. remains the global leader in digital asset development.

I won’t rehash the pros and cons of an SBR, as numerous articles already exist on the topic. Likewise, I am not discussing a Strategic Digital Asset Reserve (SDAR) that includes multiple cryptocurrencies, though, for obvious reasons, my editors wish I would (life comes at you fast). That would introduce complexities around holding tokens of privately owned companies, regulatory risk, and governance challenges that differ significantly from Bitcoin as a reserve asset.

Instead, this article frames the SBR debate as a modern Bretton Woods moment – analyzing it through the lens of the Prisoner’s Dilemma – a game theory model that policymakers should use to determine whether Bitcoin accumulation is a rational national strategy or a speculative gamble.

A Strategic Bitcoin Reserve

Nations create strategic reserves to ensure access to critical resources in times of crisis or economic instability. The best-known example is the U.S. Strategic Petroleum Reserve, established in 1975 in response to the 1973-74 oil embargo, which severely disrupted global energy markets. The reserve acts as a buffer, stabilizing prices and ensuring energy security.

Strategic reserves aren’t limited to energy. Canada maintains a strategic maple syrup reserve to stabilize market supply, while China holds reserves of rare earth metals, grain, and pork to manage supply chain disruptions.

Gold reserves are the classic example, and have historically served as a hedge against currency volatility and economic downturns. Countries like Russia and China have aggressively increased their gold reserves in recent years, reflecting a growing skepticism toward the U.S. dollar’s dominance in global trade. If the US established a SBR, it would function similarly, serving as a hedge against fiat currency fluctuations and as an alternative store of value.

Moreover, strategic reserves are not just about economic protection; they are also about power projection. The ability to control supply and access to crucial resources can shift economic power on the global stage. Countries that dominate reserves of essential assets gain leverage in diplomatic negotiations, trade agreements, and international financial stability.

Current Landscape: Policy, Politics, and Global Activity

El Salvador, under President Nayib Bukele, became the first nation to establish a SBR, buying BTC with public funds. While the policy remains controversial, it has sparked interest among developing nations seeking alternative reserves to counterbalance reliance on the U.S. dollar. Although not strictly strategic reserves, China and the United Kingdom hold 190,000 and 61,000 Bitcoins that they have seized from illegal actors – making them some of the largest holders in the world.¹ At the same time, the BRIC nations have proposed a new common digital currency and multilateral trade agreements to challenge the U.S. dollar’s hegemony position and reduce the influence of our monetary and fiscal policies. 

President Trump first floated the idea of an SBR to position the U.S. as the dominant Bitcoin-holding nation during the 2024 campaign. The new administration has quickly enacted several digital asset executive orders and brought the SBR debate to the top of the agenda. The leading proposal for a SRB comes from Senator Cynthia Lummis (R-WY) – Chair of the Senate Banking Subcommittee on Digital Assets – who introduced the BITCOIN Act (S. 4912). The bill would require the Treasury to buy 200,000 bitcoins annually for five years until the reserve hit one million tokens – representing 5% of the global supply of Bitcoin.

This is the backdrop upon which the SBR prisoner’s dilemma game is played. 

Game Theory Scenario: The Prisoner’s Dilemma of Bitcoin Reserves

The Prisoner’s Dilemma is a game theory model where two actors face a choice: cooperate (stay the course) or defect (change strategy). The optimal outcome depends on what the other actor does.

In the context of a Strategic Bitcoin Reserve, nations can decide to:

• Cooperate (Ignore Bitcoin): Maintain reliance on fiat reserves.

• Defect (Accumulate Bitcoin): Purchase Bitcoin as a strategic asset.

• One-Sided Defection: If one country accumulates while others do not, the first-mover gains strategic leverage if Bitcoin turns out to be a strategic reserve.

• Mutual Defection (Both Accumulate): A global Bitcoin accumulation arms race, with no party having an advantage (and arguably both parties worse off then if they stuck with fiat).

Scenario Analysis: The Prisoner’s Dilemma Grid

Analysis: The Nash Equilibrium² of the Bitcoin Prisoner’s Dilemma

In a rational outcome, nations are incentivized to accumulate Bitcoin to avoid falling behind. Given the increasing adoption of digital assets and their impact on global financial markets, the equilibrium state suggests that both the U.S. and adversaries will eventually hold Bitcoin reserves, increasing financial competition and integration into global monetary policy.

However, the timing of adoption is critical. If the U.S. moves first, it can shape Bitcoin’s global regulatory environment and leverage its accumulation to strengthen financial influence. If adversaries move first, the U.S. will be forced to enter the market later at a higher cost, diminishing its ability to dictate Bitcoin’s role in international finance.

This strategic interdependence raises an important policy question: Should the U.S. make the first move, or should it wait? If the U.S. delays too long, it risks being reactive rather than proactive, potentially undermining its financial sovereignty in an increasingly decentralized world. While hesitation allows for greater regulatory clarity and stability, inaction may mean ceding early-mover advantage to rival nations.

Ultimately, policymakers must weigh Bitcoin’s volatility and risks against its long-term strategic importance. If Bitcoin continues to grow as a store of value and a hedge against fiat devaluation, the optimal strategy is to accumulate (and accumulate first) while maintaining a strong regulatory framework, ensuring that Bitcoin enhances U.S. financial dominance rather than undermining it.

Bitcoin’s price volatility, regulatory uncertainty, and security risks remain major concerns. However, failing to act could allow China, Russia, or BRICS nations to leverage Bitcoin as an alternative financial weapon against U.S. economic influence.

Conclusion: A Modern Bretton Woods for Policymakers

The Strategic Bitcoin Reserve debate is not just about Bitcoin – it is about global financial positioning. The Bretton Woods Agreement of 1944 shaped the modern monetary system, placing the U.S. dollar at the center of global finance. If Bitcoin continues to grow in influence, policymakers must decide whether to integrate it into national reserves or risk letting adversaries take the lead.

A modern Bretton Woods 2.0 discussion would evaluate not just Bitcoin accumulation, but also the broader framework of digital assets and financial stability. While stablecoins, digital dollar policy, and market structure reforms should remain top priorities, ignoring Bitcoin’s reserve potential could prove to be a strategic misstep in the long run.

The real question is: Will the U.S. lead the Bitcoin era, or will it react too late?

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

^[1]  The United States has also seized 207,189 Bitcoins which some argue could be the starting point for a US SRB.

^[2]  Sorry, that was a Beautiful Mind joke. This is a Nash Equilibrium.

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