Why South Dakota Should Consider a Bitcoin Reserve: Benefits and a Plan Forward
As of March 11, 2025, the idea of states adopting Bitcoin as a reserve asset is gaining traction across the U.S., with several states exploring legislation to integrate this cryptocurrency into their financial systems. South Dakota, while recently hitting a roadblock with its own Bitcoin reserve proposal, could still position itself as a forward-thinking leader in this space. Here’s a breakdown of what a Bitcoin reserve plan could look like for South Dakota, why the state might pursue it, and the potential benefits for its residents and economy. Let’s dive in and make this accessible for everyone!
The Context: Bitcoin Reserves in the U.S.
Across the country, states like Florida, Arizona, Utah, Ohio, Missouri, and Kentucky are actively pushing bills to establish Bitcoin reserves, inspired partly by President Donald Trump’s pro-crypto stance and his pledge for a national Bitcoin stockpile. South Dakota joined this trend when Representative Logan Manhart introduced House Bill 1202 in January 2025, aiming to allow up to 10% of the state’s public funds to be invested in Bitcoin. However, the bill was deferred in February by the House Commerce and Energy Committee, effectively stalling it for the current session due to concerns over Bitcoin’s volatility and regulatory uncertainty. Despite this setback, Manhart has vowed to reintroduce it in 2026, signaling that the conversation is far from over.
So, why revisit this idea, and what could a solid plan look like for South Dakota? Let’s explore the “why” and the “how” in a way that’s easy to grasp.
Why South Dakota Might Want a Bitcoin Reserve
- Hedge Against Inflation
Bitcoin is often called “digital gold” because its supply is capped at 21 million coins, making it immune to the kind of inflation that erodes fiat currencies like the U.S. dollar. South Dakota’s state funds, currently tied to traditional assets, could lose value over time as inflation creeps up. Holding Bitcoin could act as a shield, preserving the state’s purchasing power for future generations. - Economic Diversification
South Dakota’s economy relies heavily on agriculture, tourism, and some manufacturing. Adding Bitcoin to the state’s portfolio diversifies its financial holdings, reducing dependence on traditional markets that can be hit hard by recessions or commodity price swings. It’s like not putting all your eggs in one basket—a smart move for long-term stability. - Attracting Innovation and Investment
By embracing Bitcoin, South Dakota could signal to tech-savvy businesses and crypto entrepreneurs that it’s open for innovation. This could draw blockchain startups, remote workers, and investors to the state, boosting job creation and tax revenue. Imagine Sioux Falls becoming a mini-hub for crypto companies—pretty exciting, right? - Long-Term Growth Potential
Bitcoin’s historical performance is jaw-dropping. Over the past five years, it’s averaged returns of over 1,000%, despite its ups and downs. If South Dakota had invested just 1% of its funds in Bitcoin a decade ago, that chunk would be worth a fortune today. While past performance isn’t a guarantee, the potential for high returns could fund infrastructure, education, or tax relief down the road. - Staying Ahead of the Curve
With states like Arizona and Florida moving forward, and even countries like Brazil and Poland eyeing Bitcoin reserves, South Dakota risks falling behind if it doesn’t act. Adopting a reserve now could position it as a leader in the U.S., especially if federal policy eventually follows Trump’s crypto-friendly vision.
What Could a Bitcoin Reserve Plan Look Like?
Here’s a practical, step-by-step layout for South Dakota to implement a Bitcoin reserve, keeping it simple yet strategic:
- Start Small: 2-5% Allocation
- Instead of jumping to 10% as proposed in HB 1202, begin with a modest 2-5% of state funds (e.g., from the $2 billion-ish in South Dakota’s investment portfolio). This limits risk while testing the waters.
- Example: If $50 million is allocated and Bitcoin grows 50% in a year, that’s $25 million in gains—real money for state projects.
- Long-Term Holding Strategy
- Commit to holding Bitcoin for at least 5-10 years, as institutions like the University of Austin are doing. This smooths out short-term volatility (like the 64% drop in 2022) and capitalizes on Bitcoin’s long-term upward trend.
- Set strict rules: No selling unless specific financial emergencies arise, ensuring it’s a reserve, not a trading fund.
- Secure Custody
- Partner with a reputable crypto custodian (e.g., Coinbase Custody or Fidelity Digital Assets) to store Bitcoin safely in offline “cold” wallets, protecting against hacks.
- Use multi-signature wallets requiring multiple approvals for withdrawals, adding an extra layer of security.
- Gradual Acquisition
- Buy Bitcoin incrementally over 12-18 months (e.g., $5 million monthly) to avoid spiking the price and to average out costs during dips. This “dollar-cost averaging” approach reduces risk.
- Legislative Safeguards
- Pass a bill with clear guidelines: define the allocation cap, custody standards, and conditions for liquidation. Include annual audits to keep it transparent for taxpayers.
- Tie it to broader crypto-friendly laws, like protecting self-custody rights or exempting Bitcoin nodes from money transmitter licenses, to boost adoption.
- Public Education Campaign
- Launch a simple initiative to explain Bitcoin to South Dakotans—think town halls or a website with FAQs. Transparency builds trust and counters fears about volatility.
Benefits for South Dakota
- Financial Upside: Even a small stake could yield big returns, funding schools, roads, or healthcare without raising taxes.
- Economic Boost: Attracting crypto businesses could create high-paying jobs and put South Dakota on the tech map.
- Resilience: A Bitcoin reserve diversifies the state’s assets, making it less vulnerable to economic downturns or dollar devaluation.
- Leadership: Being among the first states to succeed could give South Dakota bragging rights and influence in national crypto policy.
Addressing the Concerns: Why Do It Despite the Risks?
The main pushback in South Dakota—like volatility and regulatory uncertainty—is real. Bitcoin’s price can swing wildly (it dropped to $91,980 on February 24, 2025, after a 4% dip), and federal rules are still murky. But here’s the counterpoint:
- Volatility Fades Over Time: Long-term holders see less risk. A 5-year strategy mitigates those wild swings.
- Regulation Is Coming: With Trump’s administration exploring a national reserve, clarity is likely on the horizon. South Dakota could get ahead of it.
- Risk Is Relative: Traditional investments like stocks or bonds aren’t immune to crashes either—think 2008. Bitcoin’s a different flavor of risk, not a unique one.
Critics like State Investment Officer Matt Clark argue Bitcoin lacks intrinsic value. But its value comes from scarcity and global demand—qualities gold has, yet we don’t question gold reserves. Plus, as JP Richardson of Exodus told TheStreet, “The real risk is sticking to assets that lose value over time.”
Final Thoughts: A Bold Move Worth Considering
South Dakota has a chance to turn its “no” into a “yes” with a smart, cautious Bitcoin reserve plan. Start small, secure it well, and hold for the long haul—that’s the recipe. The benefits? A stronger economy, a hedge against inflation, and a shot at leading the pack in a crypto-driven future. Representative Manhart’s 2026 push could be the moment South Dakota says, “Why not us?”
What do you think, readers? Could Bitcoin be South Dakota’s next big play, or is it too risky for state funds? Drop your thoughts below—I’d love to hear where you stand!