Background Introduction

What is a Sovereign Wealth Fund?

A sovereign wealth fund (SWF) is an investment fund established by a nation or government to manage fiscal surpluses or resource revenues. Its primary objective is to achieve capital appreciation through diversified investments, stabilize fiscal income, and accumulate wealth for future generations. These funds are typically managed by independent institutions and invest in a wide range of assets, including global stocks, bonds, real estate, and infrastructure, ensuring long-term asset growth and national economic stability.

Unlike high-risk investments, sovereign wealth funds prioritize steady growth, making them crucial for safeguarding economic security and addressing future challenges.

The Establishment of a U.S. Sovereign Wealth Fund

The United States has officially announced the establishment of a sovereign wealth fund, aiming to optimize national capital allocation, strengthen economic resilience, and benefit all citizens. Treasury Secretary Scott Bessent stated that the fund is expected to be fully formed and operational within the next 12 months. However, specific details have not yet been disclosed, drawing significant attention from the market.

Source: whitehouse.gov

Overview

The U.S. Sovereign Wealth Fund was established on February 3, 2025, when President Donald Trump signed an executive order directing its creation. The fund was conceived as an “alternative strategy” in case relying solely on cryptocurrencies as strategic reserves proved ineffective.

According to the executive order, the U.S. Department of the Treasury and the Department of Commerce were given 90 days to submit a detailed plan, outlining key elements such as funding mechanisms, investment strategies, fund structure, and governance models. The plan also mandates that the fund be fully established within one year.

President Trump nominated Benjamin Black as the head of the fund to ensure efficient operations. Black currently serves as a managing partner at investment firm Fortinbras Enterprises. His father, Leon Black, is a co-founder of Apollo Global Management, one of the world’s leading asset management firms.

During his campaign, Trump repeatedly emphasized the need for the U.S. to learn from the successful sovereign wealth fund models of countries like Norway and Saudi Arabia. He advocated for leveraging national resources, such as energy revenues, and transforming them into long-term investment capital to enhance economic stability and drive sustainable development.

Source: https://x.com/PressSec/status/1886474248455086456

U.S. State-Level Sovereign Wealth Funds

Source: bitcoinlaws.io

At the federal level, the United States has never had a sovereign wealth fund. However, 20 states have already established similar funds, such as the Alaska Permanent Fund and the North Dakota Legacy Fund, which primarily derive their capital from energy or land revenues.

If Trump’s proposal materializes, it would mark the first-ever national-level sovereign wealth fund in U.S. history, representing a significant shift in the country’s economic policy.

Additionally, 23 U.S. states have introduced legislation related to Bitcoin and digital assets, with 15 states actively implementing laws to regulate and integrate cryptocurrencies into their financial systems.

For example:

Arizona: Proposed the creation of a Strategic Bitcoin Reserve Fund, capped at 10% of public funds, contingent upon the federal government establishing its own Strategic Bitcoin Reserve (SBR). This proposal aligns with Senator Cynthia Lummis’ Bitcoin legislation, which seeks to allow states to participate in federally managed crypto asset programs.

Utah: Passed legislation permitting up to 10% of certain state funds to be invested in digital assets, protecting self-custody rights and ensuring that node operators are not classified as money transmitters. The bill adopts a broad definition of digital assets, without explicitly mentioning Bitcoin, taking a more comprehensive approach to incorporating crypto into state-level investment strategies.

North Dakota (HB1184) & Wyoming (HB201): Both states attempted to pass similar laws but failed to secure approval in their respective legislative processes.

As more states explore Bitcoin and digital asset regulations, Trump’s sovereign wealth fund proposal could signal a major shift in U.S. financial policy, potentially influencing state-level attitudes toward Bitcoin and the broader crypto economy.

Source: bitcoinlaws.io

Sovereign Wealth Funds in Other Countries

Leading sovereign wealth funds worldwide have begun allocating assets to cryptocurrencies, particularly Bitcoin. For example, according to K33 data, the Norwegian Government Pension Fund, the largest sovereign wealth fund in the world, indirectly holds 3,821 BTC. Since June 30, 2024, the fund has increased its Bitcoin holdings by 1,375 BTC, with an annual increase of 2,314 BTC. Compared to its Bitcoin holdings at the end of 2023, this represents a 153% growth.

Source: x

Abu Dhabi’s sovereign wealth funds, such as Mubadala Investment Company, have reportedly invested in Bitcoin-related assets. As per disclosures in early 2025, the fund has invested approximately $460 million in spot Bitcoin ETFs, including products from BlackRock.

Source: x

According to Forbes, Bhutan’s sovereign wealth fund, Druk Holdings & Investments (DHI), has invested tens of millions of dollars in Bitcoin and Ethereum. Data from BitcoinTreasuries.net indicates that Bhutan’s holdings amount to 10,635 BTC, valued at approximately $1.02 billion as of February 24, 2025.

Source: bitcointreasuries.net

Differences Between Sovereign Wealth Funds and Bitcoin Strategic Reserves

Sovereign Wealth Funds (SWFs) focus on long-term investment returns, mitigating risk through diversified investments and supporting stable national economic development;

On the other hand, Bitcoin Strategic Reserves (BSRs) function primarily as a store of value, intended to hedge against financial risks. However, their viability depends heavily on Bitcoin’s long-term market growth potential.

Future Outlook

As Bitcoin’s role in the global financial system continues to grow, the possibility of the U.S. incorporating Bitcoin into its sovereign wealth fund or establishing a Strategic Bitcoin Reserve (SBR) has become a widely discussed topic.

1. The Potential for Bitcoin as a National Strategic Asset

In the coming years, the U.S. may officially recognize Bitcoin as a strategic asset, similar to gold or oil reserves.

Supporters argue that Bitcoin’s scarcity (capped at 21 million BTC) and anti-inflationary properties make it a strong long-term store of value. At the 2024 Bitcoin Conference, Donald Trump pledged that if the U.S. were to hold a significant amount of Bitcoin, it “may never need to sell it,” reinforcing economic resilience. Senator Cynthia Lummis’ proposal for a 1 million BTC national reserve—accounting for 5% of the global Bitcoin supply—could significantly impact market dynamics if realized.

Sovereign wealth funds could also play a role in this strategy. By integrating Bitcoin into diversified portfolios, the U.S. could leverage its appreciation to offset national debt or fund infrastructure projects. Norway’s sovereign wealth fund has indirectly invested nearly $400 million in Bitcoin, setting a precedent that could encourage broader institutional adoption if the U.S. follows suit.

Source: lummis.senate.gov

2. State-Level Experiments Paving the Way for Federal Action

The early adoption of Bitcoin policies by U.S. states may serve as a blueprint for federal regulations. As of February 2025, 23 states have introduced Bitcoin and digital asset-related legislation, and 15 states have implemented reserve strategies.

For example, Arizona proposed a state-level Bitcoin reserve fund, and Texas, with its low energy costs and pro-business environment, has become a hub for Bitcoin mining. If these state-level initiatives prove successful, they could reduce concerns over volatility and regulation, setting the stage for larger-scale federal adoption. A collaborative model could emerge, where state funds gain experience and expertise while a federal sovereign fund provides funding and policy support.

3. Reshaping the Global Financial Landscape & Bitcoin Price Impact

If the U.S. formally holds Bitcoin reserves or integrates it into a sovereign wealth fund, it could trigger a global domino effect. Other countries might follow suit, leading to a “Bitcoin reserve race”, similar to the 20th-century gold reserve competition. This shift could significantly increase Bitcoin prices, as sovereign wealth funds accumulate holdings. It could also accelerate Bitcoin’s role in global trade and reserve currency frameworks, and prompt institutions like the IMF and World Bank to reconsider their stance on digital assets.

At the same time, this move could solidify U.S. leadership in the digital economy. However, it might also create friction with allies, particularly European nations that remain cautious about crypto adoption. The EU’s MiCA (Markets in Crypto-Assets) framework provides a strict, unified approach to crypto regulation, potentially leading to divergent global policies.

Source: esma.europa.eu

4. Evolution of Technology & Regulation

The success of a Bitcoin reserve or sovereign wealth fund will depend on technological advancements and regulatory clarity. If improved, enhanced blockchain security (such as quantum-resistant encryption) could help alleviate concerns about network attacks. The widespread adoption of cold storage and multi-signature wallets will also provide security for government Bitcoin holdings. Additionally, the clarification of regulatory frameworks will be crucial.

If the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) can agree on Bitcoin’s classification and regulatory oversight, institutional participation will likely accelerate, paving the way for government involvement.

5. Two Possible Future Scenarios

Based on current trends, two distinctly different scenarios may emerge in the future:

Optimistic Scenario: Bitcoin Becomes a National Strategy

By 2030, the U.S. could accumulate hundreds of thousands of BTC, integrating it into sovereign wealth funds or independent reserves. Long-term holding strategies could mitigate volatility, positioning Bitcoin as a hedge against inflation and national debt.

State and federal Bitcoin funds collaborate, attracting global capital. The U.S. leads in digital asset policy, reinforcing the dollar’s dominance.

Pessimistic Scenario: Bitcoin Reserve Experiment Fails

Public and political resistance could halt the initiative if the Bitcoin price crashes or security vulnerabilities are exposed. Regulatory inconsistencies and funding shortages may also delay implementation, ultimately making Bitcoin reserves an “expensive lesson.” Other countries could seize the opportunity to fill the vacuum, weakening the U.S. financial influence.

6. Social & Cultural Shifts

In the long run, establishing Bitcoin reserves could transform public perception of digital assets. Bitcoin’s evolution from a speculative instrument to a nationally recognized asset would accelerate its adoption in everyday life.

Educational institutions may incorporate more blockchain courses into their curricula, while businesses might increasingly accept cryptocurrency payments. This cultural transformation would establish the foundation for the next generation’s economy, positioning the United States advantageously in a technology-driven future.

Risks

Despite widespread interest in incorporating Bitcoin into U.S. sovereign wealth funds or establishing a Strategic Bitcoin Reserve (SBR), this vision faces numerous challenges. These challenges extend beyond technical and market factors, including political, economic, and regulatory complexities. Here’s an analysis of the main obstacles:

1. Bitcoin’s Dramatic Price Volatility

As an asset class, Bitcoin’s price fluctuations far exceed those of traditional reserve assets like gold or oil. Looking at its performance in recent years, Bitcoin has risen several-fold within months and lost half its value in short periods. If the U.S. government were to include it in sovereign wealth funds or reserves, this value instability could threaten fiscal planning.

Critics point out that this volatility contradicts the sovereign wealth fund’s goal of pursuing long-term stable returns and could lead the public to question the soundness of government investment decisions. For example, if the government purchases Bitcoin at a high point and subsequently faces a market crash, taxpayers could bear enormous losses.

2. Uncertainty of Funding Sources

Establishing a sovereign wealth fund or Bitcoin reserve requires massive initial capital, but the current U.S. fiscal situation is not optimistic. The federal government has continued to run budget deficits in recent years, and the 2024 fiscal year deficit is expected to exceed $2 trillion. Unlike Norway (which relies on oil revenue) or Saudi Arabia (which relies on energy exports), the U.S. lacks a stable source of surplus income.

Treasury Secretary nominee Scott Bessent has proposed “monetizing existing government assets,” but exactly how to proceed—whether by selling land, cutting other programs, or adjusting tax policies—remains unclear. If Bitcoin is purchased through debt, it could exacerbate the debt burden, running counter to the original intention of reducing the deficit.

Source: x

3. Cybersecurity and Storage Risks

Bitcoin’s decentralized nature relies on crypto wallets and blockchain technology, which also introduces security vulnerabilities. Government holdings of large amounts of Bitcoin could become prime targets for hackers. If private keys are lost or mismanaged, Bitcoin becomes permanently irrecoverable—a severe challenge for government agencies that depend on transparency and accountability.

For instance, on February 21, 2025, the cryptocurrency exchange Bybit lost approximately $1.5 billion worth of Ethereum. On the morning of February 24, the stablecoin digital bank Infini platform also experienced an exploit, with cryptocurrency valued at about $49.5 million stolen.

Source: x

Source: x

4. Lack of Regulatory and Legal Framework

The U.S. regulation of digital assets remains fragmented. The Commodity Futures Trading Commission (CFTC) views Bitcoin as a commodity, the Securities and Exchange Commission (SEC) sometimes considers it a security. At the same time, the Internal Revenue Service (IRS) treats it as property. This multi-headed regulation leads to inconsistent policies that may hinder large-scale government ownership of Bitcoin.

For example, if Bitcoin were redefined as a financial instrument requiring strict regulation, government investments might face additional legal barriers. Furthermore, anti-money laundering (AML) and know-your-customer (KYC) requirements could apply to government transactions, further increasing operational complexity.

5. Lack of Intrinsic Value and Public Acceptance

Unlike oil (with energy uses) or gold (with industrial and cultural value), Bitcoin’s value primarily comes from market confidence and scarcity rather than practical utility. Critics argue this characteristic makes it more of a speculative asset than a reliable strategic reserve. Additionally, public acceptance of government Bitcoin holdings remains questionable.

Opinion polls show that while younger generations support cryptocurrencies, many taxpayers still view them as high-risk bets. Failed government investments could trigger political backlash, especially considering stereotypes associating Bitcoin with “elites” or “tech circles.”

6. Global Competition and Geopolitical Risks

Incorporating Bitcoin into national strategy could provoke international responses. Other countries might follow the U.S. example, leading to dramatic Bitcoin price fluctuations or intensified supply competition. More importantly, if countries like China or Russia choose to sell off their Bitcoin holdings, it could shock the market and undermine the value of U.S. reserves.

Furthermore, if Bitcoin is seen as a tool challenging U.S. dollar hegemony, American allies (such as European countries) might view this skeptically, affecting international cooperation.

Source: bitcointreasuries.net

7. Management and Transparency Challenges

Sovereign wealth funds and Bitcoin reserves require efficient management mechanisms, but the U.S. government often faces bureaucratic obstacles when implementing large-scale new projects. The Strategic Petroleum Reserve is an example, where management and release decisions have been delayed due to political disagreements.

Bitcoin management could be even more complex: Should it be held directly by the Treasury or managed through private institutions (such as banks or crypto companies)? Either way, transparency remains an issue. The public may demand real-time disclosure of holdings and transaction records, which conflicts with Bitcoin’s anonymity features and could expose government strategies.

Conclusion

The future of U.S. Bitcoin reserves and sovereign wealth funds is filled with potential. In the short term, the execution of Trump’s executive order and the results of state-level pilot programs will determine the direction of this initiative. In the long term, this strategy could reshape the global financial order. The key lies in balancing risks and rewards while addressing technological, financial, and regulatory challenges. Although this vision remains in its early stages as of February 2025, its impact could unfold over the next decade, making America’s experiment a topic of global significance.

Sovereign wealth funds (SWFs)—traditionally focused on conventional assets—are now expanding into digital assets, with some nations already integrating Bitcoin into their reserves. Establishing a U.S. sovereign wealth fund marks a shift in capital management strategies. It could enhance fiscal resilience and influence the global financial system if successfully implemented. However, while Bitcoin’s decentralized and inflation-resistant nature offers advantages, it still faces regulatory and market volatility challenges.

Looking ahead, as nations explore hybrid investment models that combine traditional and digital assets, the integration of sovereign wealth funds and Bitcoin may emerge as a major global financial trend. Policymakers must carefully balance risks and returns, developing robust investment strategies to ensure long-term stability and growth.