Did Someone Loot The Strategic Bitcoin Reserve?
Photo Illustration by Ute Grabowsky/Photothek via Getty Images.
On July 15 the United States Marshal Service answered a Freedom of Information Act petition with a spreadsheet that showed 28,988.35643016 bitcoins in its custody, worth about $3.4 billion as of this writing. This number is far below the approximately 200,000 coins the White House has repeatedly cited since March.
The slim total ricocheted through social media and caused many to wonder whether Washington had secretly liquidated more than 80% of its bitcoin stockpile. U.S. Senator Cynthia Lummis (R-WY) labeled the move a “total strategic blunder” and warned that, if true, it would set America back in the international race to stockpile hard digital money.
Two days later, blockchain intelligence firm Arkham shared data it had collected about the whereabouts on the bitcoin blockchain of the federal government’s holdings. Its analysts traced at least 198,000 coins, worth roughly $24 billion, to bitcoin addresses tied to the FBI, DEA, DOJ, and assorted U.S. Attorney offices. Arkham’s fascinating thread offers detailed evidence that none of these coins had budged in four months.
However, while the clarification steadied markets, it raised a valid question: why is the most transparent asset in financial history still shrouded in bureaucratic opacity while it sits on the federal balance sheet? Only four months ago, President Trump signed Executive Order 14233, “Establishment of the Strategic Bitcoin Reserve and United States Digital Asset Stockpile,” promising a speedy audit of every digital asset that Washington controls.
The order additionally directed the Treasury Secretary to launch a dedicated office, demanded each federal agency report its holdings within thirty days, and set a sixty-day deadline for an investment roadmap outlining budget-neutral ways to accumulate additional coins.
The audit is key to the administration’s credibility with the public because America already sits atop the largest sovereign hoard on record. It dwarfs the UK’s roughly £2 billion haul from criminal seizures and surpasses Bhutan’s billion-dollar trove built from government-backed bitcoin mining projects.
Yet the machinery for managing the reserve remains primitive. Last summer, the U.S. Marshals Service outsourced custody and trading of “Class 1” digital assets to Coinbase Prime under a five-year, $32.5 million contract. The deal streamlined forfeiture logistics but placed the signing keys (and therefore control) outside the federal government.
Coinbase’s cold-storage vaults may satisfy procurement checklists, but they also prevent the public and lawmakers from accessing cryptographic proof that the coins exist at all, an approach that leaves the door open to rumors like last week’s phantom liquidation.
Transparency and the Strategic Bitcoin Reserve
Executive Order 14233 was clear: within two months, Treasury would complete an audit, and within three months, the Department of Commerce would propose budget-neutral strategies for accumulating more bitcoin in the reserve. Those deadlines came and went without proactive communication about what was being done. Now, Bo Hines, who serves as the Executive Director of the President’s Council of Advisers on Digital Assets, has announced that the report is expected tomorrow.
If tomorrow’s report is simply an accounting, that would be better than what we have today. Even without cryptographic evidence that the coins are there, if we combine the contents of a credible report with Arkham’s research, we can be fairly confident that the number of bitcoins purported to be held in reserve is accurate. However, this is only part of what needs to be done.
Going forward, the federal government must establish processes that will continuously provide cryptographic verification of the reserve’s contents. No matter how accurate an audit is, it is only accurate at a single point in time and becomes obsolete as soon as it is published; it can say nothing about whether the coins will stay there or how we can check in the future.
Achieving this transparency would be straightforward, though it would take some technical development. Since at least 2020, exchanges such as Kraken and Binance have published proof-of-reserves attestations that combine cryptographic signatures with Merkle-tree data structures so any outsider can determine whether assets exceed liabilities. Treasury could take a similar approach. It would announce a universe of reserve addresses, shuffle a satoshi among them in a transaction that anchors a Merkle commitment of seizure case numbers, and pledge to repeat the maneuver every quarter. No sensitive information would leak, but Congress, markets, and the public at large would gain much needed visibility and confidence.
A Benchmark for the Digital Asset Industry
Bitcoin is the first monetary instrument that allows a sovereign to prove reserves in a transparent and continuous fashion, yet so far the U.S. has continued to treat its holdings like fiat – with the source of truth being numbers typed into a spreadsheet. The confusion sparked by the FOIA response last week, and Arkham’s followup research, saved the administration from market chaos this time, but next time the rumors about a loss of funds may be harder to stop – or may even be true.
Robust cryptographic proof of reserves demands neither congressional action nor novel technology. Bitcoin technology already supports it, and the Treasury Inspector General already employs independent auditors. Coinbase’s contract already entails institutional-grade cold storage. What remains is to get smarter about accounting for digital assets, and accepting that it is fundamentally different from accounting for legacy assets. Working out the engineering and accounting details for how to proceed would naturally follow. Cryptographic validation of on-chain funds would transform the Strategic Bitcoin Reserve from a legal document to a verifiable fact and provide a benchmark for the digital asset industry as a whole. Until that happens, the United States is asking global markets to extend trust where it could furnish proof. In an era defined by immutable ledgers, that is a fragile bargain.
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