Despite the US government’s possible hesitance to buy more Bitcoin, Michael Saylor's MicroStrategy continues its aggressive Bitcoin accumulation under its 21/21 plan. Meanwhile, pro-crypto policies face some urgency with a two-year legislative window under the incoming Trump administration. However, a controversial new IRS rule classifying DeFi front-ends as brokerages has sparked widespread criticism, legal challenges, and concerns over innovation and decentralization in the industry.
US Government to Hold Bitcoin Stockpile
Galaxy Digital’s research division projected that the United States government will not purchase additional Bitcoin (BTC) in 2025 but will focus more on safeguarding its existing holdings. According to Alex Thorn, Galaxy’s head of research, the US government will instead explore a Bitcoin reserve policy by using its current stockpile of close to 183,850 BTC, which is valued at around $17.24 billion. While discussions on adopting Bitcoin as a reserve asset will continue, the government seems poised to rely on its existing holdings rather than buying more.
US government crypto holdings (Source: Spot On Chain)
Thorn shared that there will likely be movements in federal departments and agencies to examine the implications of an expanded Bitcoin reserve policy. This aligns with Wyoming Senator Cynthia Lummis’ Bitcoin Act 2024, which is a proposed bill that, if passed, would authorize the US government to accumulate 200,000 BTC annually over five years. This will eventually create a reserve of 1 million Bitcoin to be held for at least two decades.
Galaxy Digital analysts believe that the US adopting a stronger Bitcoin stance could also spur some global competition among nation-states. Analyst “JW” speculated that unaligned nations, adversaries of the US, or those with large sovereign wealth funds might adopt strategies to mine or buy Bitcoin in response. The potential for Bitcoin adoption could also extend to the corporate world, with up to five Nasdaq 100 companies potentially adding Bitcoin to their balance sheets.
Globally, reactions to the prospect of US Bitcoin adoption have varied. Japan’s Prime Minister Shigeru Ishiba is still uncertain about the movements of countries like the US and others toward adopting Bitcoin reserves. Meanwhile, former Binance CEO Changpeng “CZ” Zhao predicted that smaller nations will likely lead the charge in adopting Bitcoin reserves, although he still acknowledged that the shift could take time. Zhao also suggested that China could emerge as one of the key players when it comes to adopting a strategic Bitcoin reserve.
Saylor Teases New Bitcoin Move
While the US government may be a bit hesitant to add to its Bitcoin stockpile, the same can not be said for Michael Saylor and MicroStrategy. Saylor shared a Bitcoin chart from the SaylorTracker website on Dec. 29, continuing his Sunday tradition of hinting at even more potential Bitcoin purchases.
Posts like these from Saylor very often precede a Monday acquisition by MicroStrategy. The company's most recent purchase on Dec. 22 involved 5,200 BTC at an average price of $106,000 per coin. This was its smallest acquisition since July of 2024. Saylor is a steadfast Bitcoin advocate, and has consistently openly voiced his commitment to purchasing Bitcoin regardless of its price.
In December, MicroStrategy called a special shareholders meeting to secure additional funding for Bitcoin purchases under its ambitious 21/21 plan. This initiative aims to raise $42 billion over three years, split evenly between equity offerings and fixed-income corporate securities, to boost the company’s Bitcoin holdings.
Beyond corporate strategy, Saylor also proposed a comprehensive framework for digital assets in the United States. His plan includes establishing a Bitcoin strategic reserve capable of offsetting the US national debt by creating $16 trillion to $81 trillion in asset wealth. He believes that growing the digital asset market to a $10 trillion valuation could reinforce the US dollar’s position as the global reserve currency, driving demand for US government securities and overcollateralized stablecoins like Tether’s USDt.
Saylor’s framework also categorizes digital assets into six types: digital commodities, digital securities, digital currencies, digital tokens, non-fungible tokens, and digital ABTs tied to real-world commodities.
Pro-Crypto Policies Face Two-Year Deadline
David Sacks, who was recently appointed as the "AI and crypto czar," has a very narrow two-year window to drive pro-crypto policies in the United States before the 2026 midterm elections. Joe Doll, general counsel for NFT marketplace Magic Eden, recently pointed out the urgency of the situation in an interview, and warned that a divided government after the midterms could lead to gridlock. This makes it essential to act while both chambers of Congress remain under the current administration's control. Doll also shared that with the slim House majority likely to flip, policymakers have only 24 months to enact major changes.
Party breakdown (Source: US House Press Gallery)
The crypto community welcomed the incoming administration's pro-innovation stance. David Sacks is a long-time supporter of cryptocurrencies and technological innovation, and was celebrated for his new role. On Dec. 4, President-elect Trump also nominated Paul Atkins as chairman of the SEC. This was followed by the selection of Stephen Miran as chairman of the Council of Economic Advisors. He was praised for his pro-deregulation stance and encouragement of technological progress.
Rep. French Hill of Arkansas further reinforced the administration's priorities by pointing out the GOP’s focus on introducing a comprehensive regulatory framework for cryptocurrencies. He revealed that crafting a digital asset market structure bill is a top priority for Republican leadership, and there are already plans to advance the legislation within the first 100 days of the new legislative session.
New IRS Rule Threatens DeFi Innovation
Although the Trump administration seems hard at work creating a pro-crypto environment, a new IRS rule may dampen the excitement quite a bit. The crypto industry is grappling with a new Internal Revenue Service (IRS) reporting rule that classifies decentralized finance (DeFi) front-ends as brokerages.
The rule was issued on Dec. 27, 2024, and attracted widespread criticism and immediate legal challenges. If implemented, the regulation will require DeFi front-ends and decentralized exchanges to comply with broker reporting requirements by 2027.
Alex Thorn outlined three potential paths for DeFi applications in response to the rule. They can choose to comply with the IRS requirements and accept their classification as brokerages, block US users entirely, or opt to become highly decentralized by abandoning smart contract upgrades and revenue generation. Thorn did mention that extremely decentralized applications that lack front-end websites, cannot be upgraded, and do not collect fees may be exempt from the rule.
The rule sparked serious opposition in the crypto industry, and many advocacy groups and executives categorized it as government overreach. Consensys attorney Bill Hughes also criticized the timing of the rule’s release, and suggested it was intentionally issued during the holiday season to minimize scrutiny.
In response, organizations including the Texas Blockchain Council, the Blockchain Association, and the DeFi Education Fund filed a joint lawsuit against the IRS on the same day that the rule was announced. The lawsuit argues that the rule represents unconstitutional overreach by the Department of the Treasury and the IRS. Crypto executives also called on Congress to intervene and block the regulation by warning that it could stifle innovation and drive DeFi development away from the United States.
