The idea of the United States government adding Bitcoin to its national balance sheet might sound far-fetched, but it’s an intriguing scenario to consider. If former President Donald Trump were to direct such an action, what existing legal authorities could be used to execute this plan?
Let’s delve into two potential mechanisms that could theoretically support this unprecedented move, though they would likely stretch the interpretation of statutory language and depend on a favorable judicial response.
Could the Exchange Stabilization Fund be used to purchase Bitcoin?
Firstly, one possible route for this kind of governmental action could involve the Treasury Secretary purchasing Bitcoin using funds from the Exchange Stabilization Fund (ESF). The ESF’s usage is primarily governed by the Gold Reserve Act of 1934, which allows the Secretary of the Treasury to “deal in gold and foreign exchange, and such other instruments of credit or security” as necessary to stabilize the dollar’s exchange value.
This statutory language could potentially be interpreted to include Bitcoin, particularly if it’s designated as “foreign exchange” or a “security.” Such a designation could argue that Bitcoin acts as a global medium of exchange and points to its acceptance as legal tender by countries like El Salvador.
Furthermore, the White House could issue an Executive Order to establish the necessary emergency conditions for such actions, and Treasury’s Office of General Counsel could draft a legal opinion supporting this interpretation.
It’s important to note that while the Executive Branch must report ESF transactions to Congress quarterly, Congress does not have the power to block these transactions, providing a somewhat unilateral path forward under this framework. Making it possible in theory.
Could the Federal Reserve use its emergency powers to purchase Bitcoin?
Another, more speculative, approach involves the Federal Reserve. Under the Federal Reserve Act, specifically Section 13(3), the Fed can address “unusual and exigent circumstances” by creating Special Purpose Vehicles (SPVs) to conduct market operations that might otherwise be outside its typical purview.
This mechanism was notably employed during the COVID-19 pandemic when the Fed purchased corporate bonds that had fallen in value. Similarly, an SPV could theoretically be used to facilitate open market purchases of Bitcoin. Which would represent a novel application of the Fed’s emergency powers and, as such, might face significant legal challenges without explicit backing from Congress.
Conclusion
The discussion of whether the U.S. government, under a directive from someone like Donald Trump, could legally buy and hold Bitcoin involves a complex interplay of statutory interpretations and executive powers.
Both the use of the Exchange Stabilization Fund and the Federal Reserve’s emergency powers present possible, though legally tenuous, pathways for such an action. But this scenario underscores the broader implications and potential challenges of integrating cryptocurrency into national financial strategies and the legal and regulatory frameworks that would need to be navigated and perhaps couldn’t take place because Trump promises this.
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