The US is currently in the process of establishing a federal sovereign wealth fund. This will centralize national financial reserves, placing them under government watch. There are rumors that these funds may include digital assets, such as Bitcoin, Ethereum, and other high-profile cryptocurrencies. We discuss this in the article below.
Reports this week indicate that crypto czar David Sacks will try to make the US the dominant force in the digital landscape. This could be done by incorporating Bitcoin into a forthcoming Sovereign Wealth Fund. The US will, however, be far from the first nation to adopt digital currencies into a sovereign wealth fund. Bhutan is one nation, albeit much smaller, that uses capital from domestic mining operations and channels it into Bitcoin. Singapore also supposedly has Bitcoin holdings through the company Temasek. Even Norway has been holding it through its positions in some of the major global crypto exchanges. However, it will be a bold move for one of the world’s largest economies to adopt this.
What Is a Sovereign Wealth Fund?
Bitcoin is always notoriously volatile. However, it has seen even more speculation at the start of February, as possible tariffs in the United States rattled the markets. These tariffs were suggested for goods coming from Mexico, Canada, and China. In the first weekend of the month, Bitcoin improved and made a comeback to $100,000 as possible Mexican tariffs were delayed. This was after a low of around $91,212.63 when the tariffs were announced. Shares in several major crypto platforms and exchanges had also fallen.
However, the recovery in the Bitcoin price USD was undoubtedly also down to the discussion of a sovereign wealth fund. Though it did not specifically discuss Bitcoin, sentiment toward it would suggest it would be included, and this buoyed confidence. As an agreement was reached with Mexico, and talks began with Canada, this price drop eased off. Bitcoin quickly regained its $100,000 key level, and other cryptocurrencies also regained value after nearly a 20% drop across the wider market.
Most countries have sovereign wealth funds. They are designed to invest in the interests of the nation. A tool for development, they can also be used for investment and a nest egg all at once. Taking current money, a fund will invest it in a range of ways designed to benefit the nation’s future and generations to come. Aiming to invest in the good of the country or state, they can also be used to buy shares in companies, fund government programs, and buy into financial products.
Money to build the fund can come from a variety of sources. Generally, they are created from leftover revenue from state-owned natural resources. Thus, it is why they are popular with countries that have lots of natural resources in abundance. Other sources can be bank reserves, trade surplus, and money from the privatization of companies.
There are several types of different wealth funds. The US has categorized theirs as a strategic development-focused one, though no one yet knows what this development will be. Several states already have their own sovereign wealth funds. For example, Alaska has the Permanent Fund Corporation, which is worth $79.6 billion and pays a dividend to residents.
Incorporating this could signal a bright future for the US. If Bitcoin is included, then further adoption of blockchain technologies may occur. This could be used in many different ways, from legal to real estate and everything in between.
Utah’s Race to a Bitcoin Reserve
One state that is firmly staking its claim on the growth of Bitcoin is Utah. They are moving forward, utilizing the state’s quick 45-day legislature, to establish a Bitcoin reserve. This would make it the first state in the US to do so. Having this short time frame allows it to pass the post on to other states. The state also has a Digital Asset Taskforce. Operating all year, it can continue to plan, strategize, and innovate in the field at times when other states are closed for business.
There are several other factors that position them at the forefront of the race. In January they introduced a proposal for a Bitcoin reserve. This was pushed forward in just a week. With its fast-moving decisions and a crypto task force in place to look ahead of the curve, they are perfectly placed not just to execute this but to make it work. The state has long had a positive outlook on Bitcoin. With this efficient structure in place, it could set a precedent and be the benchmark for incorporation into state reserves.
Crucially, when traditional stocks dropped and recovered in the last week, they did so in the same time frames as Bitcoin. This shows an increasing correlation between traditional financial investments and the currency. All of this could be a harbinger of things to come. If Bitcoin is included in a sovereign wealth fund, it shows further widespread acceptance of it into mainstream finance. With Bitcoin ETFs and possibly reserves in individual states, Bitcoin could be set for its biggest year of mainstream acceptance yet.
