If 1% of federal taxes were paid in Bitcoin over the next 20 years, the United States could generate up to $14 trillion in cumulative value, according to a new model from the Bitcoin Policy Institute presented with Congressman Warren Davidson’s Bitcoin for America Act.
The bill, introduced on November 20, would allow taxpayers to settle federal debt in Bitcoin and direct all incoming coins to the Strategic Bitcoin Reserve created by executive order earlier this year.
He said:
“The Bitcoin for America Act will position our country to lead, not follow, as the world navigates a future of healthy money and digital innovation.”
Obtaining Bitcoin through taxes
The proposal would add a new acquisition route to the federal framework established in March, when the White House ordered all seized Bitcoin to be consolidated into a dedicated reserve and non-Bitcoin assets placed in a separate digital reserve.
This move ended years of auctions and moved the government toward an accumulation structure rooted in flows of confiscation.
Data from the Bitcoin Treasury shows that US federal agencies now control 326,000 BTC following enforcement actions and asset recoveries, although attributes continue to evolve as new wallet clusters are identified.
Davidson’s bill would change the structure by allowing voluntary Bitcoin payments to the IRS and eliminating capital gain recognition on those transactions.
According to the bill text, the Treasury Department would work with regulated financial institutions to provide custody, settlement, and cold storage operations while recording taxpayer payments at fair value to satisfy its liability.
This structure provides a way for individuals and businesses to transfer appreciated Bitcoins without triggering profits, but current rules often encourage holders to sell them for dollars before paying them to the IRS.
This change introduces Bitcoin directly into reserves, creating market-driven inflows that do not require allocation or direct purchases by the Treasury.
Revenue modeling and valuation
The Bitcoin Policy Institute supported the bill and published a model showing how large reserves could be built through a steady annual inflow of Bitcoin tax payments.
Federal government revenue reached about $5.23 trillion in fiscal year 2025, according to Treasury Department data. If 1% of the nation’s taxes were transferred in Bitcoin, the inflow would amount to approximately $52.3 billion annually at current income levels.
Depending on the average Bitcoin price over the period, this equates to hundreds of thousands of coins accumulated over a 10-year period. If the average price of Bitcoin is between $75,000 and $150,000, a 10-year period with 1% adoption would add approximately 350,000 to 700,000 BTC to the reserves.
At the same time, higher adoption levels will scale linearly, with the same range generating around 1.7 million to 3.5 million BTC in the 5% scenario, but liquidity constraints may actually impact the price.
BPI’s 20-year long-term scenario, on the other hand, assumes continued deployment, a stable cost base, and no reflexive price impacts from federal purchasing pressures.
This model generates over 4.3 million BTC with 1% adoption from 2025 to 2045, with an implied base case terminal price of approximately $3.25 million per coin.
The institute calculates that the net benefit would be nearly $13 trillion compared to maintaining the same flow in cash equivalents. The combination of this adoption and the cap on the long-term price movement reflects the compound interest effect of long-term holding of reserves without selling incoming Bitcoins.
The macro context determines how the policy is interpreted. The federal budget deficit is still rising, with fiscal year 2025 scheduled to end with a shortfall of nearly $1.8 trillion on $5.23 trillion in revenue, according to the Congressional Budget Office. Interest costs remain high relative to historical standards.
As a result, proponents frame Bitcoin flows as a balance sheet hedge against dollar debt, while detractors focus on the volatility that arises when non-yielding assets are valued by the market.
The executive order itself describes the Strategic Bitcoin Reserve as a government-owned long-term storage facility for Bitcoin, similar to how governments manage gold stockpiles rather than short-term liquidity positions.
Market risk and operational risk
Implementing operations based on Davidson’s proposals would require an overhaul of the Treasury Department, requiring an acceptance system to time-stamp prices, manage refund protocols for intraday volatility, and enforce sanctions checks on incoming UTXOs.
These technical mandates include aligning multi-signature governance with federal cybersecurity standards and complicate revenue scoring for budget analysts by removing taxable events typically triggered when holders sell for dollars.
Beyond internal logistics, the sheer scale of these inflows poses volatility risk to the broader market structure.
At a 1% adoption rate, the government’s annual Bitcoin intake will approach the trading volume of spot exchanges during off-season periods, and with higher participation rates, flows will approach daily net issuance levels.
This continued accumulation could reduce free float and widen spreads in bull cycles if the buyer profile becomes predictable, calling into question the BPI model’s assumption that federal procurement does not have a reflexive effect on prices.
(Tag translation) Bitcoin
