Introduction
Building a Bitcoin reserve for Culver City (located in Los Angeles County) is a forward-looking initiative aimed at enhancing the city’s financial resilience. Such a reserve involves allocating a portion of financial holdings into Bitcoin (BTC) – a decentralized digital asset often likened to “digital gold” due to its capped supply and independence from central banks . The strategic plan outlined here examines how a municipal Bitcoin reserve could serve multiple purposes (long-term investment growth, inflation hedge, treasury diversification, and emergency preparedness) while navigating practical constraints. We discuss how much Bitcoin the city might reasonably hold given budget limitations, the legal/regulatory framework in California and the U.S., implementation models (government-led vs. private or public-private partnerships), custody and security considerations, and lessons from other municipalities and entities that have pursued crypto reserves. The goal is to provide Culver City with a comprehensive roadmap that balances innovation with prudence under current (2024–2025) market and regulatory conditions.
Objectives of a Bitcoin Reserve
A Bitcoin reserve could advance several financial and strategic objectives for Culver City. Key purposes include:
- Long-Term Investment Growth: Bitcoin has seen significant long-term price appreciation historically, albeit with volatility. Allocating a small portion of funds to BTC could potentially yield high returns over a multi-year horizon, bolstering city finances if the asset appreciates. For instance, the city of Roswell, NM explicitly adopted a minimum 10-year holding period for its Bitcoin reserve, banking on long-term growth while acknowledging short-term volatility . Culver City can similarly treat Bitcoin as a long-term endowment-like asset that, if grown substantially, might fund future projects or liabilities.
- Hedge Against Inflation: Like gold, Bitcoin’s finite supply (capped at 21 million) makes it appealing as an inflation hedge or store of value. In an era of elevated inflation and currency debasement concerns, holding BTC could protect a portion of the city’s purchasing power. Bitcoin is “provably scarce” and not tied to any one nation’s monetary policy , so it may retain or increase value when fiat currencies lose value. While Bitcoin’s price can swing in the short run, many view it as an inflation-resistant asset over the long run (especially as global adoption grows). A modest BTC reserve could thus serve as insurance against persistent inflation or dollar weakness.
- Treasury Diversification: Municipal treasuries typically hold conservative assets (cash, bonds, etc.). Adding Bitcoin introduces a new asset class that could improve the overall risk-adjusted profile of city reserves. Because BTC’s performance is largely uncorrelated to bonds or equities over longer periods, it can act as a diversifier – potentially rising when traditional assets falter. Diversification is a prudent strategy to avoid over-reliance on a single asset type. Sovereign and institutional interest in Bitcoin is growing for similar reasons; even some U.S. states (e.g. Texas) have begun treating BTC as a strategic asset rather than a speculative bet . By holding a carefully measured Bitcoin position, Culver City signals its alignment with a digitally innovative financial future while diversifying its balance sheet.
- Emergency Preparedness: The reserve could double as an emergency fund or “rainy day” resource for unforeseen crises or budgetary shortfalls. In Roswell’s case, the Bitcoin reserve is earmarked to support community aid programs like senior utility subsidies and disaster relief once it grows beyond a certain threshold . Culver City could similarly designate its BTC reserve for emergency response or recovery efforts (e.g. earthquake relief, infrastructure repair after a disaster) if and when the reserve’s value appreciates substantially. Bitcoin’s advantages – global liquidity and 24/7 market access – mean the city could liquidate or leverage it on short notice if urgent funding is needed when other sources are strained. Additionally, in a scenario of severe economic distress or currency instability, Bitcoin holdings might provide critical stability or spending power. While the hope is that such emergencies never occur, a Bitcoin reserve serves as a financial buffer of last resort.
Beyond these primary objectives, a Bitcoin reserve could yield secondary benefits. It would position Culver City as a tech-forward, innovative city, potentially attracting blockchain-related businesses and talent. (Notably, Fort Worth, Texas received extensive media coverage and interest from tech firms after becoming the first U.S. city to mine Bitcoin as part of a pilot program .) It also allows city staff to build internal expertise in managing digital assets, which could prove useful as finance evolves. These objectives, however, must be weighed against risks – which the plan addresses through careful sizing, legal compliance, and risk management strategies.
Reserve Size and Funding Strategy
How much Bitcoin should Culver City hold? Determining the reserve size requires balancing potential benefits with fiscal prudence and legal constraints. As of FY2024–25, Culver City’s general fund budget is about $188 million, with roughly $118 million in ending fund balance (reserves) . Commonly, the city maintains at least 30% of annual expenditures in a contingency reserve for emergencies , which amounts to around $50–60 million given current budgets. Carving out a portion for Bitcoin must not undermine these essential reserves.
A practical approach is to start small and scale gradually. For example, an initial allocation on the order of 1% (or even less) of the city’s reserve funds could be considered. One percent of Culver City’s $118 million general fund reserve is about $1.2 million. Allocating this amount to Bitcoin would be significant enough to matter if BTC appreciates (e.g. a 10x increase could turn it into $12 million), yet small enough that a total loss would not materially harm city finances. By comparison, New Hampshire’s new law allows up to 5% of certain state funds to be invested in precious metals and digital assets , and Texas’s legislature initially funded its state Bitcoin reserve with $10 million in public money – figures which represented a tiny fraction of their overall budgets. Culver City’s initial reserve could similarly be capped (e.g. at 1–2% of reserves, or a fixed dollar limit) to limit exposure.
Donation and funding sources: The city may not need to use taxpayer dollars at all to seed the reserve. One appealing model is to solicit voluntary contributions or grants of Bitcoin from private donors, local businesses, or foundations. Roswell’s Bitcoin reserve was kick-started by an anonymous donation of 0.0305 BTC (worth ~$2,900) which the city officially recognized and integrated into its treasury in April 2025 . The donation-based approach has two advantages: (1) it avoids any direct diversion of public funds (mitigating political/public concerns), and (2) it can rally community support and publicity around the initiative. Culver City could establish a city-controlled crypto wallet to accept BTC donations and market this to prospective donors who support the city’s long-term vision. If donation inflows are modest, the city could later consider a supplemental budget allocation or matching funds. Another funding avenue is to reinvest windfalls or budget surpluses – e.g. year-end surpluses or one-time revenues – into Bitcoin, rather than touching core service funds.
Phased accumulation: Rather than buying a lump sum all at once (which risks buying at a peak price), Culver City could accumulate Bitcoin gradually over time (dollar-cost averaging) or only during particularly favorable market conditions (e.g. after significant price dips). This phased approach smooths out volatility risk in the entry price. It also allows time to refine policies and observe the reserve’s performance. For example, the city might plan to acquire, say, 10 BTC per quarter (adjusting the amount based on prices) until a target reserve size is reached. Or it could set a multi-year target (e.g. 50 BTC over 3 years) and adjust pace as needed.
Thresholds and review: It’s prudent to set clear limits and review points. The city could specify an absolute cap (e.g. “no more than $X or Y BTC in the reserve without further Council approval”) to ensure comfort. Additionally, periodic reviews (annual or biannual) by the City Council or a designated committee should assess the reserve’s value relative to city finances and decide if adjustments are needed (either taking some profit or adding more during budget flush times). As a safeguard, Texas explicitly passed a law (HB 4488) to prevent its Bitcoin reserve funds from being transferred into the general budget , thereby insulating the reserve from being easily spent down. Culver City could similarly “lock up” the Bitcoin reserve for its strategic purposes (long-term growth and emergency use) and avoid using it for routine budget balancing except in extreme necessity.
In summary, the reserve size should be meaningful but restrained – likely on the order of low single-digit millions of dollars initially. Starting small aligns with best practices observed elsewhere: Roswell started with a few thousand dollars and set a future value goal of $1 million before major utilization , and even bold initiatives in large governments (New Hampshire, Texas) limit crypto to a single-digit percentage of funds. This careful sizing will help manage volatility risk while still achieving the desired diversification and hedge benefits over time.
Legal and Regulatory Framework
Establishing a Bitcoin reserve requires navigating a patchwork of laws at multiple levels of government. Culver City must comply with municipal and county rules, California state law (which heavily governs local government finance), and federal regulations. Below we outline the relevant legal considerations:
Local (City/County) Governance: Culver City is a charter city, which gives it some autonomy in municipal affairs, but investment of public funds is largely guided by state law. The city’s own investment policy likely references California Government Code constraints, and traditionally cities are limited to safe investments (e.g. government bonds, bank deposits, LA County investment pool, etc.). The city would need to ensure that holding cryptocurrency is not in violation of its charter or municipal code. Currently, no Culver City ordinance addresses crypto in treasury, so an ordinance or resolution would likely be required to authorize this new asset class. Los Angeles County itself does not directly control city investments, but county treasurer guidelines (for pooling investments) and general prudent fiduciary standards will be relevant. In short, local officials must formally approve and document the reserve’s purpose, limits, and oversight to meet fiduciary duties and public transparency standards.
California State Law: At present (2025), California law does not explicitly authorize municipalities to invest public funds in cryptocurrency, which presents a legal hurdle. Public entities in California are governed by the Government Code (in particular, Sections 53600 et seq.) regarding allowable investments. These statutes enumerate permitted investments (such as U.S. Treasuries, municipal bonds, bank CDs, high-grade commercial paper, etc.) and typically do not include crypto. In fact, many public agency investment policies in California explicitly prohibit cryptocurrency investments as they are not authorized by law . Thus, for Culver City to directly purchase and hold Bitcoin with city funds, the state law would likely need to be amended or clarified. California has been cautious on crypto for public funds – however, there are signs of evolving policy:
- AB 1052 (2025): California recently passed an amendment (effective by 2026) allowing state and local agencies to accept cryptocurrency payments for government services on an optional basis . This means that, for example, the city could choose to accept Bitcoin for payments such as permits or fees. While this doesn’t explicitly permit investing or holding long-term, it establishes crypto as “legal consideration” for transactions . It’s a step toward normalization, but importantly the law is permissive and doesn’t require any agency to hold crypto beyond facilitating a payment (and agencies might instantly convert to USD).
- No CA Strategic Reserve Law (yet): Unlike Texas, New Hampshire, or Arizona, California has not (as of 2025) enacted a law enabling a crypto reserve or authorizing treasuries to hold digital assets. Any attempt by Culver City to create a Bitcoin reserve with public funds might operate in a gray area or invite legal challenges under the current statutes. Therefore, a key part of the strategy is engaging with state regulators/legislators. The city could work with California’s Department of Financial Protection and Innovation (DFPI) and possibly lobby for a pilot or exception for innovative municipalities. In parallel, keeping the initial reserve funded by private donations or non-General Fund money could circumvent some restrictions until the law catches up (since accepting a donation and holding it in trust for public purpose might be treated differently than investing taxpayer funds).
It’s worth noting California’s regulatory climate: the state is rolling out the Digital Financial Assets Law (effective July 2025) to license and oversee crypto businesses . While this targets exchanges and crypto service providers (not the city itself), it underscores that any custodian or partner the city uses will need to be properly licensed in CA by 2025–2026. Also, California (like New York) is concerned with consumer protection – any city initiative must be transparent and accountable to avoid the perception of gambling with public money.
Federal Law and Regulations: Federally, there is no prohibition on a government entity holding cryptocurrency, but there are important considerations:
- Securities vs. Commodities: Bitcoin is generally deemed a commodity (the U.S. SEC has indicated Bitcoin is not a security, and the CFTC treats it as a commodity). This regulatory consensus on Bitcoin is helpful – it means the city wouldn’t be holding an unregistered security. However, other crypto assets often face SEC scrutiny; hence the reserve should likely be limited to Bitcoin (and perhaps secondarily Ether if ever considered) to stay in clear legal territory. Indeed, many state reserve laws set a high market cap threshold (e.g. $500 billion) to ensure only Bitcoin qualifies .
- Accounting and Tax: The city will need to adhere to governmental accounting standards for digital assets. The Governmental Accounting Standards Board (GASB) has been developing guidance on how to report crypto – likely treating it as an investment at fair market value with periodic unrealized gains/losses. There’s no federal tax on holdings (and as a government, Culver City is tax-exempt), but if the city ever transacts (sells BTC), it should be mindful of IRS rules (crypto is taxed as property on capital gains). Any realized gains from sales would simply go into city revenue without tax, but detailed record-keeping of cost basis and proceeds is necessary.
- Financial Regulations: If the city works with banks or custodians, federal regulators (OCC, FDIC, Fed) may indirectly influence what’s allowed. U.S. banks are under strict guidance when dealing with crypto; however, a few federally regulated custodians (like Anchorage Digital, a federally chartered crypto bank) exist. The city should use only compliant institutions. Also, anti-money-laundering (AML) laws mean the city must ensure any crypto it receives (especially donations) are not from illicit sources. Fortunately, public donations can be vetted and traced on-chain; the city can refuse suspicious sources. Federal law enforcement has sometimes seized crypto from illegal activity – it’s notable that the U.S. Treasury itself holds significant forfeited Bitcoin and is considering a strategic reserve with those assets . This signals federal acceptance of holding crypto under the right circumstances.
Precedents and Constraints: The city should be aware of how other jurisdictions have handled the legal aspect:
- New Hampshire’s law (HB 302 in 2025) explicitly permits the state treasury to invest up to 5% in digital assets and metals, but mandates using U.S.-regulated custody or regulated investment vehicles . This kind of statutory authority does not exist in California yet.
- In Arizona, attempts to allow treasury investment in crypto were vetoed by the governor in 2023, citing that public retirement funds shouldn’t be exposed to untested virtual currency . This reflects a cautious stance that may be present in California officials too.
- New York City’s recent flirtation with crypto was via a proposed “BitBond” (a municipal bond partly tied to Bitcoin performance). The NYC Comptroller declared the idea “legally dubious and fiscally irresponsible,” noting that current federal tax laws likely would not allow issuing tax-exempt debt to buy crypto, and that the city had no mechanism to handle Bitcoin payments . While this was a different mechanism (debt financing a reserve), the underlying message is clear: any plan must be on solid legal footing and not jeopardize the city’s fiscal stability.
Action Plan for Legal Compliance: To proceed, Culver City should take the following steps:
- Obtain Legal Opinions: The City Attorney should provide an opinion on how (or if) a Bitcoin reserve can be established under current law. If purely donation-based and held separately, it might be feasible as a trust/fiduciary fund. If using general funds, identify what legal changes or approvals are needed.
- Engage State Officials: Proactively communicate with California’s Treasurer, legislators, and DFPI about Culver City’s interest in a pilot crypto reserve. California might be open to a controlled experiment, especially as other states set precedents. Pursuing a narrow bill or joining a state-level sandbox could legitimize the effort.
- Develop a City Policy: Draft a detailed policy for City Council approval that outlines the purpose of the reserve, maximum allocation, custody method, reporting requirements, and conditions for use. This policy will demonstrate a responsible approach, which can help assuage regulators and the public.
- Ensure Transparency and Accountability: Legally, and from a good governance standpoint, the Bitcoin reserve should be subject to audit and public reporting. The city’s Annual Financial Report should disclose the crypto holdings, and perhaps a dashboard can show the current value. This transparency will be key to maintaining trust given the novelty of the asset.
By proactively addressing the legal and regulatory dimensions, Culver City can minimize the risk of running afoul of the law or being caught in regulatory uncertainty. The environment is evolving – as of mid-2025, multiple states have opened the door to public Bitcoin reserves , and California is cautiously moving toward crypto integration in government . With careful compliance and likely some state-level collaboration, the city can position itself to proceed lawfully.
Implementation: Government-Led or Collaborative?
A critical strategic decision is how to implement the reserve – whether as an official city project, a privately driven initiative, or a hybrid public-private partnership. Each approach has pros and cons, and the optimal path may involve elements of all three.
- City Government–Led Initiative: In this model, the Culver City government itself would establish and manage the Bitcoin reserve. The City Council (perhaps at the Mayor’s recommendation) would adopt a resolution to create the reserve fund and allocate resources (or accept donations) to it. The city’s finance department or treasurer would then handle purchasing and custody of the Bitcoin according to the policy. Government-led implementation ensures direct control and accountability – elected officials and city staff oversee the reserve, and it is integrated with the city’s treasury operations. This approach aligns the reserve squarely with public interests and makes it easier to deploy the funds for public needs (since the city owns the asset directly). However, the challenges include navigating the legal constraints discussed (since it’s public money) and taking on all the fiduciary responsibility. Political risk is also higher – officials must justify to taxpayers why this is prudent. Some cities have considered such bold moves (e.g. Miami’s Mayor at one point explored holding Bitcoin on the city balance sheet or paying employees in BTC), but to date no major U.S. city has directly purchased Bitcoin with public funds. If Culver City goes this route, it would likely be among the first, requiring strong political will and public communication.
- Private or Community-Led Reserve: Another approach is for private entities to spearhead the reserve, with the city’s blessing. For instance, a coalition of local businesses, civic leaders, or a nonprofit foundation could raise Bitcoin funds independently, explicitly earmarked for the benefit of Culver City. The reserve could be held by that group (or in a legal trust) with an agreement that it will be made available to the city in certain circumstances (like an emergency fund or for specific projects). This model greatly reduces legal hurdles since it’s not initially public money – essentially it’s a philanthropic crypto endowment for the city. It also shields the city from direct financial risk; the city could say “we are not spending tax dollars on Bitcoin, the community is voluntarily contributing.” Roswell’s reserve has elements of this, as it was kicked off by an unsolicited anonymous donation and possibly open to further donations . The downside is that the city has less direct control – the funds might need to be managed by the private entity until transferred for a specific use. There’s also the question of trust: the public would need confidence that the private stewards won’t mismanage or abscond with the crypto. This can be handled by structuring a nonprofit with city representation on its board, or a legal agreement that the assets are ultimately for public use. A private-led initiative might work well as a pilot: it lets the concept prove itself on a small scale. If the private reserve grows successfully and demonstrates value, the city could then formally adopt or integrate it later when laws allow.
- Public-Private Partnership (PPP): A blended approach could harness the strengths of both. In a PPP model, the city and private partners (perhaps a fintech firm, an industry association, or local tech philanthropists) collaborate to establish the reserve. The city might contribute a small amount of seed funding or in-kind support, while private partners contribute funds or technical expertise. The management could be overseen by a joint committee. For example, the Texas Blockchain Council (a private nonprofit) partnered with the City of Fort Worth by donating Bitcoin mining rigs and advising on their use – effectively a partnership that advanced the city’s crypto involvement at minimal cost. Culver City could similarly partner with blockchain industry experts or local universities to manage the reserve’s technical aspects securely. A PPP could also take the form of the city issuing an RFP (request for proposal) for custodial and advisory services, inviting private firms to manage the reserve under city oversight. The advantage here is expertise and risk-sharing: the private sector can provide know-how and even guarantees (some custodians offer insurance or SLAs) to mitigate risk, while the city provides governance and legitimacy. It also can increase public trust if well-known institutions are involved (e.g. a reputable custodian, a Big Four auditing firm monitoring, etc.).
In deciding among these models, Culver City should consider the legal environment and resource capacity. If direct city action is legally constrained in the near term, a donation-driven or arms-length approach might be the only viable path initially. As laws evolve and confidence builds, the city can assume a greater role. Even if the city leads, it’s wise to incorporate external advisors – perhaps creating an advisory board of crypto finance experts, community representatives, and city officials (much like Texas set up a 3-member crypto advisory board for its reserve ). This board would advise on strategy, review security protocols, and provide an extra layer of oversight.
Regardless of the implementation route, clear documentation of roles is crucial. If private parties are involved, formal agreements or MOUs should delineate who holds the assets, under what conditions they are turned over to the city, and how decisions are made. The city should also clarify whether the Bitcoin reserve sits on its books (as a fiduciary fund or component unit, if not fully city-owned) or off its books until drawn upon – this affects transparency and accounting.
Recommendation: In practical terms, Culver City could begin with a hybrid approach: Encourage private donations and maybe create a small “Friends of Culver City Bitcoin Reserve” fund (with a fiscal sponsor or city-controlled trust account) to get started, while simultaneously laying the groundwork for a formal city-managed reserve once legally permitted. This way, the city benefits from immediate progress and community buy-in, and can transition to a full official reserve over time. Public-private collaboration will demonstrate that the city is leveraging expertise and not doing this in isolation, which can strengthen both the project’s effectiveness and its political durability.
Custody and Security of the Reserve
Safeguarding the Bitcoin reserve is absolutely critical – cryptocurrency is a bearer asset (control of the private keys is ownership), so robust custody and risk management practices are non-negotiable. Culver City must decide how the Bitcoin will be stored and who will have access, with the twin goals of security and accountability. There are two primary custody options, with possible hybrid solutions:
1. Self-Custody (City-managed wallets): The city could hold the Bitcoin directly, meaning it controls the cryptographic private keys through its officials or devices. The recommended practice for institutional self-custody is to use a multi-signature (multi-sig) wallet, where multiple keys are required to authorize any transaction. For example, the city could implement a 2-of-3 or 3-of-5 multi-sig scheme – where, say, three out of five designated key holders must sign to move any funds. These key holders could include the City Treasurer, City Manager, City Finance Director, and perhaps external trusted parties like the City’s independent auditor or a contracted crypto security firm. Splitting keys ensures no single person can access the funds unilaterally, reducing insider risk. Each key would be stored on a secure hardware device (like an encrypted hardware wallet) and kept offline (cold storage) when not in use. Keys should be stored in separate secure locations (for instance, one hardware wallet in a bank safety deposit box, another in a city vault, etc.). Key management protocols must be established for what happens if a key-holder leaves their role or a device is lost – typically, procedures for key rotation or use of a backup key would be in place. The benefits of self-custody are full control (no reliance on third parties) and no ongoing custodian fees. It might also align with decentralization principles and keep the city directly familiar with handling crypto. However, self-custody demands in-house expertise; mistakes or lapses (like failed key ceremonies, forgetting a key passphrase, or inadequate physical security) could lead to irrecoverable loss. The city would likely need to hire or consult crypto security experts to set up the system and train staff. It’s worth noting that New Hampshire’s reserve law allows direct holding with “secure custody solutions” , indicating that with proper controls, self-custody can meet governmental standards.
2. Institutional Custody (Third-party custodian): The city can entrust the Bitcoin to a qualified institutional custodian, similar to how it might use a bank or investment manager for other assets. A number of regulated companies specialize in digital asset custody for institutional clients – examples include Anchorage Digital (a federally chartered digital asset bank), Coinbase Custody (a regulated trust in New York), BitGo (which offers institutional custody and is seeking a NY trust charter), Fidelity Digital Assets, and so on. Using a custodian typically means the custodian holds the private keys (often in cold storage) on the city’s behalf, and the city accesses the funds via the custodian’s platform with proper authorizations. The advantages are professional security and insurance – these custodians have advanced security protocols (multisig, secure enclaves, physical vaults, etc.), and many carry insurance against theft or hacking. Additionally, a custodian can handle technical tasks like protocol upgrades (e.g. if there’s a Bitcoin fork or airdrop, they manage it) and provide reporting and auditing support (statements of holdings). The city would have an account much like it does with a bank or investment brokerage, making it operationally simpler. Crucially, using a U.S.-regulated custodian could satisfy legal requirements; for instance, New Hampshire mandated use of U.S.-regulated custody or investment vehicles for its crypto reserves , to ensure oversight and consumer protections. The downsides are cost (custodians charge fees, perhaps a custody fee of ~0.5% annually or per transaction costs) and counterparty risk (the city must trust that the custodian itself is secure and won’t default – hence picking a well-capitalized, compliant firm is key). Also, in a worst-case scenario of the custodian facing legal trouble or bankruptcy, assets are supposed to be segregated, but the city could face delays in access. To mitigate some risk, Culver City could choose a custodian that allows a degree of co-control – e.g. some custodians offer a model where the client retains a key in a multi-sig and the custodian holds other keys, requiring joint action. This hybrid gives the city a veto on transactions and ensures the custodian alone can’t misuse funds (and conversely, the city alone can’t move funds without the custodian’s secondary approval, adding theft protection).
3. Hybrid/Multi-Institution Custody: The most secure setups often involve multiple layers or entities. Culver City could consider splitting the reserve into more than one custody solution to diversify risk. For example, if the reserve grows large, half could be with a reputable custodian A, and half with custodian B or self-custodied by the city. Another strategy is multi-institution multi-sig – where different institutions each hold one key of a multi-sig wallet (this concept is emerging in fintech). In such a model, you might have keys held by: the city, Custodian X, and Custodian Y, requiring 2-of-3 to sign. This way, no single breach or rogue actor can compromise all keys; it requires collusion of at least two parties. Unchained Capital, for instance, advocates multi-institution custody for Bitcoin wherein independent key agents each secure a key . While complex, this approach maximizes resilience – it’s highly unlikely for geographically and institutionally separate key holders to all fail at once.
Best Practices and Risk Mitigation: No matter which custody route is chosen, certain practices should be adopted:
- Cold Storage: The bulk of the Bitcoin (if not all) should be kept in cold storage (offline), not on an internet-connected device, to protect against hacking. This might mean that accessing the reserve for a transaction could take hours or days (which is acceptable since the reserve is not for daily use).
- Multi-factor Authorization: In addition to multi-sig keys, use procedural controls – e.g. any transaction must be approved in writing by multiple officials or a committee, and perhaps have a waiting period before execution. Think of it as needing multiple “signatures” just as you would for authorizing moving millions from a bank account.
- Access Control and Backup: Limit knowledge of certain sensitive information. For instance, ensure that key passphrases or PINs for hardware wallets are known only to the key holder and one backup person sealed in an envelope (for emergency if key holder is incapacitated). Keep encrypted backups of keys (or recovery seeds) in secure escrow, such as with a law firm or bank vault, in case devices are destroyed in a disaster. These backups should be geographically distributed (so an earthquake or fire doesn’t wipe out all copies).
- Insurance: Explore insurance options for digital asset custody. Some custodians include insurance up to a certain limit for assets under custody . Additionally, specialized crypto insurance markets exist that the city could purchase a policy from, covering theft or loss of the private keys. While insurance can be pricey and may not cover all scenarios (e.g. it typically covers external theft, not insider misuse if the insiders are the insured), it can add a layer of financial protection.
- Audit and Monitoring: The Bitcoin reserve should be subject to regular audit checks. The city’s independent auditor can verify the existence of the crypto (through blockchain verification of addresses and balances) and that the controls (like key storage) are being followed. Real-time monitoring can also be implemented – for example, if the city uses a known wallet address, it can be publicly monitored so any movement of funds is immediately visible to stakeholders (though if privacy is a concern, the city might not publicize addresses; still, internal monitoring via blockchain analytics is useful).
- Adapt to Technology Changes: Bitcoin custody tech is evolving (for example, use of multi-party computation (MPC) for key management is a newer method some institutions prefer over traditional multi-sig). The city should stay updated with best practices and be ready to migrate to better solutions over time. This is another reason to maintain an advisory relationship with crypto security experts or vendors.
- Security Policy and Training: Develop a formal crypto security policy document. It should detail who has authority to initiate transactions, how keys are handled, physical security measures, incident response plans if a breach is suspected, etc. Train any city staff involved in the reserve on this policy, and perhaps conduct drills (e.g. simulate recovery from a lost key) to ensure readiness.
By implementing these measures, Culver City can mitigate the major risks of custody: theft (both external hacks and internal malfeasance), loss of keys, and operational errors. Indeed, Chainalysis notes that holding Bitcoin brings “technical requirements for secure storage [that] demand specialized expertise” , but it also points out that as the ecosystem matures, solutions and best practices are increasingly available to address these risks . The city’s strategy should thus be to leverage that expertise – whether via hiring skilled personnel or contracting reputable custodians – so that the reserve is as secure (or more so) as any other asset in the treasury.
Risk Management and Mitigation Strategies
A Bitcoin reserve introduces a unique risk profile to Culver City’s finances. Proactive risk management is therefore a cornerstone of this strategic plan. Key risks and the corresponding mitigation strategies include:
Volatility Risk: Bitcoin’s price has historically been volatile – sharp drops of 50% or more in a year have occurred multiple times. This volatility is the trade-off for its high long-term growth potential. To manage this:
- Limited Allocation: As discussed, keeping the allocation small relative to total reserves contains the impact. Even in a worst-case scenario (e.g. Bitcoin goes to zero, however unlikely), if BTC was say 1% of reserves, the city’s overall financial position remains sound.
- Long Investment Horizon: By committing to hold for the long term (5–10+ years), the city can ride out short-term bear markets. Roswell’s policy of a minimum 10-year hold is instructive – it signals they are not concerned with interim fluctuations. Culver City can similarly pledge not to touch the reserve (except for dire emergencies) for a set period. This prevents panic selling during downturns and allows time for potential recovery and gains. Historically, Bitcoin’s four-year halving cycle has seen downturns followed by new highs, rewarding those who held on.
- Threshold for Use: The city could set a rule that the Bitcoin reserve will only be drawn down under specific conditions, such as: a declared fiscal emergency or natural disaster and the BTC price is above a certain threshold (to avoid selling at a low). Roswell, for example, plans to only start using funds once the reserve surpasses $1 million in value . This creates a kind of self-imposed buffer that the fund must accumulate sufficient gains before it’s tapped.
- Potential Hedging: In the future, if derivative markets are accessible to the city (and legally permissible), it could hedge some downside risk (for example, buying protective put options or using a small inverse ETF if one is available). However, such financial engineering might be too complex/ speculative for a city context. For now, the simpler approach is careful sizing and long horizons as described.
Regulatory/Legal Risk: The legal environment around crypto can change. There’s a risk that new laws or regulations could restrict the city’s ability to hold or use Bitcoin (though outright confiscation or banning is highly unlikely in the U.S. given current trends). Mitigation includes:
- Staying Informed and Flexible: The city should monitor state and federal regulatory developments continuously. For instance, if California in a future year explicitly bans local agencies from crypto investments (or conversely fully authorizes them), the city needs to adapt immediately (either unwinding the position or formalizing it). Engaging legal counsel and government relations experts will help foresee changes.
- Public Opinion and Political Risk: Regulatory shifts often follow public sentiment. If the reserve becomes controversial, it could face political challenges. Mitigate this by educating the public and stakeholders from the start. Transparency about the reserve’s performance (report gains, losses, progress toward goals) will demystify it. Publicize the safeguards in place. Make the case, as New Hampshire’s Governor did, that this is about innovation and foresight , not reckless gambling.
Security Risk: Custody has been covered in depth in the prior section. The key risks are theft (external hacking or internal misuse) and loss of access. Mitigations are the robust custody practices detailed (multi-sig, cold storage, audits, etc.). Additionally:
- Redundancy: The city could maintain a very small “practice” wallet with a negligible amount of BTC to let staff exercise procedures (so that when handling the real vault, they’re less likely to make an error under pressure).
- Incident Response Plan: Have a plan if something goes wrong – e.g. if one key is compromised or lost, have steps ready to transfer funds to a new secure wallet with a fresh set of keys (this is possible with multi-sig if done carefully). If a breach is suspected, the city should immediately involve law enforcement and blockchain tracing firms to possibly freeze or track stolen funds (stolen crypto can sometimes be recovered if exchanges are notified, etc.).
Financial Reporting Risk: Bitcoin’s market value can swing and that will reflect on financial statements. The city must be prepared for the reserve value to potentially drop from one quarter to the next, which could draw scrutiny. To manage this:
- Accounting Approach: Work with auditors to decide on appropriate accounting treatment – likely marking to market at year-end with unrealized gains/losses going to an investment revaluation reserve. Ensure this is clearly footnoted so readers of financials understand the volatility. By policy, the city can stress that unrealized losses do not impact operations since this is a long-term hold and not budgeted for spending.
- Isolation from Operating Budget: Keep the Bitcoin reserve in a separate fund or account, not commingled with the general fund operating monies. Texas did this by law – firewalling their Bitcoin reserve from general revenue . Culver City should similarly treat it like a special fund. This way, day-to-day city services are never dependent on Bitcoin value; the reserve is supplemental.
Opportunity Cost Risk: One could argue that money in Bitcoin could have been used elsewhere or invested in safer yields. This is true, so the city should clarify that it is not diverting core funds needed for services. The initial amounts would likely come from surplus or donations, as discussed. The city can also periodically evaluate performance: for instance, after 5 years, compare the BTC reserve’s growth to what the same money would’ve done in the city’s pooled investments. If Bitcoin severely underperforms expectations over a long period, the city could reconsider the strategy (just as it would any poor-performing investment). Essentially, have an off-ramp criteria: e.g. “If after X years Bitcoin has not appreciated at all or has caused net loss, the Council may liquidate the reserve and redeploy funds to conventional reserves.” Knowing this exists can reassure skeptics that the city is not blindly wedded to crypto regardless of outcomes.
Precedent Risk: Because this is novel, Culver City will be watched. Success could inspire others; failure (or scandals) could hinder crypto adoption elsewhere in government. This adds pressure to do it right. Mitigation is to embrace that leadership role carefully – document everything, share knowledge with other municipalities, perhaps coordinate with organizations like the National League of Cities or California League of Cities if they have task forces on fintech. In other words, turn the precedent risk into an opportunity to shape best practices.
Finally, consider contingency planning. For example, if Bitcoin undergoes a major technical issue (like a unexpected fork or an exploit – highly unlikely for BTC, but scenario planning is prudent), have experts on call to advise. Or if there’s a period of excessive froth (say the reserve suddenly doubles in value in a short time), the city might decide to take some profits (sell a small portion) to lock in gains for safety – this should be discussed in policy upfront (i.e. is the goal truly never to sell until needed, or to occasionally rebalance?).
By identifying these risks and enacting clear mitigation strategies from the start, Culver City can greatly increase the likelihood that its Bitcoin reserve will function as intended – as a solid, long-term asset that complements the city’s finances without introducing unmanaged hazards. As one framework, educating stakeholders is vital: a community that understands why the city holds Bitcoin and how risks are controlled is more likely to support the initiative through the inevitable ups and downs of the market.
Case Studies and Precedents
Culver City is not alone in exploring cryptocurrency reserves; around the world and across the U.S., various governments and institutions have taken steps – some small, some bold – toward integrating crypto into public finance. Analyzing these examples provides valuable lessons and confidence that Culver City’s plan is grounded in real-world experience.
Roswell, New Mexico (First Municipal Bitcoin Reserve in U.S.): In April 2025, Roswell made headlines as the first U.S. city to formally establish a Bitcoin reserve for its community . The initiative began with a tiny donation of 0.0305 BTC (~$2,900) from an anonymous source . Though modest in size, Roswell’s approach is pioneering: the city earmarked the Bitcoin’s future gains for public benefit programs, including subsidizing senior citizens’ water bills and funding emergency disaster relief . Roswell committed to hold the BTC for at least 10 years, explicitly recognizing volatility and aiming for significant appreciation over a decade . They even set a goal: if the reserve exceeds $1 million, it would be utilized as a dedicated emergency fund . This case demonstrates several key points:
- A municipality can start crypto reserves via donations without allocating taxpayer money, which helps build public support.
- Clear social purposes for the crypto fund (helping seniors, disaster aid) can make the concept more tangible and appealing to residents.
- Long-term horizon and rules (10-year minimum hold) signal fiscal responsibility and deter rash decisions.
- Roswell also highlighted the importance of internal process – there was a lag of a few months between the BTC donation and the city formally integrating it, indicating careful policy setup and verification .
- The city openly discussed both opportunities (innovation, attracting investment, diversification) and challenges (price swings, regulatory uncertainty, security) , showing they approached it thoughtfully. They distilled advice for others: “start small,” “define purpose clearly,” “develop clear policy,” “prioritize security,” seek expertise, educate stakeholders, and focus on long-term strategy . Culver City can directly apply these lessons in its own rollout.
Texas (State-Level Bitcoin Reserve): In June 2025, Texas became the first U.S. state to actually fund a Bitcoin reserve with public money, following the passage of Senate Bill 21 . The Texas Strategic Bitcoin Reserve launched with $10 million appropriated for immediate BTC purchases . Importantly, Texas structured the reserve to be independent of the state’s general treasury, overseen by the Comptroller’s office and a crypto advisory board . They also enacted House Bill 4488 to protect the reserve from being raided by future budget writers . This strong legal framework ensures the Bitcoin is held long-term as intended (as a hedge and strategic asset). Texas limited eligible assets to those with market cap over $500B – effectively only Bitcoin qualifies – to avoid risky altcoins. The law allows the reserve to grow not just by purchases but also via airdrops, forks, and donations . Texas will report on the fund every two years, ensuring transparency . What Culver City can draw from Texas:
- High-level political backing (Governor and legislature) can drive a crypto reserve – in Culver City’s case, strong City Council and possibly state-level support will help.
- Legal safeguards (ring-fencing the reserve) are wise to emulate at the city scale via policy or local law.
- Use of an advisory board of experts is a best practice to manage such a reserve .
- Even governments view Bitcoin not as a short-term speculation but as a “sovereign financial instrument worth holding long-term” . This language can bolster Culver City’s narrative as well.
- The Texas example also shows momentum: it referenced that New Hampshire was actually the first state to pass a Bitcoin reserve law, and Arizona had passed certain related provisions . So multiple states are moving in this direction, indicating a trend that municipal players can be part of.
New Hampshire: As noted, NH passed HB 302 in 2025, becoming the first state with a Bitcoin reserve law . NH allows up to 5% of certain state funds to be invested in gold, silver, or digital assets, with a $500B market cap requirement (Bitcoin being the only likely candidate) . The law also requires U.S.-regulated custody or regulated investment vehicles for holding the assets . Governor Kelly Ayotte touted it as a win for innovation and “financial foresight” . This underscores the value of framing the initiative as forward-thinking and prudent. For Culver City, NH’s experience suggests ensuring any custody partner is regulated (which we plan to do), and it shows that winning political support may require close votes (NH’s bill narrowly passed the House by 13 votes amid debate – indicating not everyone will be easily convinced). Building a strong case and coalition is thus important.
Other Municipal Efforts:
- Fort Worth, Texas (Bitcoin Mining Pilot): While not a reserve, Fort Worth’s 2022 pilot program to mine Bitcoin is a relevant precedent for municipal crypto involvement. The city ran a small mining operation (three machines donated by the Texas Blockchain Council) in City Hall for six months . The result was only ~$1,019 net revenue , but officials stated profit was never the goal. The real benefit was branding Fort Worth as a tech innovator, which succeeded: the city got nearly 753 million media impressions, and inquiries from tech companies around the country considering relocating or doing business there . “Fort Worth is not afraid to be innovative,” said the city’s Chief of Strategy , highlighting that being an early adopter yields reputational capital. This example is encouraging for Culver City – even a modest crypto initiative can amplify the city’s profile as an innovation hub, possibly attracting investment (especially relevant in greater LA where cities compete for tech/media firms). It also shows the value of partnership: the donation of equipment and expertise from a nonprofit partner reduced costs and risk for the city. Culver City might similarly collaborate with local blockchain groups for aspects of its reserve implementation.
- Miami, FL: Miami pursued a different crypto strategy. The city partnered with a private group to launch “MiamiCoin” in 2021 – a city-branded cryptocurrency whose mining revenue partly went to the city. Miami reportedly earned several million dollars’ worth of cryptocurrency in a reserve wallet through this experiment. However, the value of MiamiCoin plummeted, and the project faced criticism. Miami’s mayor also expressed intent for the city to pay employees in Bitcoin and let residents pay fees in Bitcoin, though those were aspirational and limited by state law. Lesson: Stick to established assets like Bitcoin rather than a new unproven token. Miami’s experience cautions that while chasing crypto innovation is laudable, the approach matters. Culver City’s plan to hold Bitcoin (a universally recognized asset) is far less speculative than creating a new city token.
- New York City: NYC’s Mayor Eric Adams is a crypto proponent (famously taking his own paychecks in Bitcoin). He proposed innovative ideas like “BitBonds” – bonds where a portion of proceeds would invest in BTC as a reserve. However, as we saw, the City Comptroller shot down the BitBond plan citing legal and stability concerns . This shows that in large, complex cities, skepticism can be high. Culver City, being smaller, might be more nimble, but it should still take those concerns seriously (hence our strong focus on legal compliance and not endangering core budgets). The takeaway from NYC is to ensure any such plan is unquestionably in line with legal financing purposes and to clearly demonstrate how it won’t undermine fiscal health. It also suggests engaging city financial officers (CFO, treasurer) early so they are comfortable and supportive, not blindsided.
- International Examples:
- El Salvador: On a national level, El Salvador famously adopted Bitcoin as legal tender in 2021 and holds it in its treasury. They have used a custodial arrangement and even launched Bitcoin-backed bonds. The country’s experience has been mixed – they faced short-term paper losses as Bitcoin’s price fell in 2022, but the government remained committed, focusing on long-term benefits and tourism boost. A city like Culver City obviously doesn’t control currency policy, but El Salvador’s example underscores the political will needed and the importance of weathering volatility with a long view.
- Rio de Janeiro, Brazil: Rio’s mayor announced plans in 2022 to allocate 1% of the city’s treasury reserves to cryptocurrency (primarily Bitcoin) . This move was part of a strategy to become a crypto hub and hedge part of the city’s finances. It shows that major cities globally see merit in a small crypto allocation. Rio also planned to accept property taxes in Bitcoin. The status of these plans by 2024 might provide insight, but the key is the 1% figure – that seems to be a common-sense upper bound for initial allocation in a treasury context, aligning with our recommendations.
In summary, precedent is accumulating that governments can responsibly engage with Bitcoin:
- Start small (Roswell, NH’s 5%, Rio’s 1%, etc.).
- Have a clear rationale and use-case (whether it’s community aid like Roswell, inflation hedge like Texas citing financial resilience , or attracting innovation like Fort Worth).
- Enshrine safeguards (Texas’s legal protections , multi-sig custody, etc.).
- Be transparent and patient (all examples emphasize long-term and reporting).
Culver City can proceed confident that while it may be among the first in California, it joins a growing cohort of municipalities and states blazing this trail. The city’s proactive planning and adoption of best practices will position it to be a model case that others can look to. In fact, by carefully documenting its journey, Culver City could contribute to a playbook for municipal crypto reserves in the future.
A physical Bitcoin symbolically placed against a city backdrop (Roswell, NM) – illustrating the concept of a municipality holding Bitcoin reserves for community benefit. Roswell was the first U.S. city to initiate a Bitcoin reserve, funded by a small donation and aimed at aiding public services . Culver City’s plan builds on such pioneering examples with its own strategic approach.
Current Market and Regulatory Conditions (2024–2025)
Any strategic financial plan must take into account the prevailing environment. As of late 2024 and 2025, several conditions influence the wisdom and practical execution of a Bitcoin reserve for Culver City:
Market Conditions: The crypto market has matured compared to the wild west of years past, but volatility remains:
- Bitcoin Price & Cycle: Bitcoin experienced a significant downturn in 2022 (losing over 50% of its value from all-time highs), a reminder of its volatility. In 2023, it began recovering, and many analysts anticipate a positive trend into 2024–2025, partly due to Bitcoin’s programmed “halving” event in 2024 which historically has led to bull markets. By mid-2025, Bitcoin’s price is still below its peak but on more stable footing, and there is growing optimism of new highs within a few years. For Culver City, this timing could be advantageous – initiating a reserve when the market is not at euphoric peak levels could allow the city to accumulate BTC at a reasonable cost basis before a potential next wave up. Of course, short-term swings will occur, and the city should psychologically and financially be prepared for that.
- Macro-economic Factors: As of 2024, inflation in the U.S. is moderating from the highs of 2021–22 but still above the Fed’s 2% target. The Federal Reserve’s interest rates are relatively high (~5%), which makes holding cash or bonds more attractive than during near-zero rate years. However, those yields still may not fully outpace inflation. Bitcoin’s appeal as an inflation hedge might come into play if inflation surprises on the upside again or if geopolitical issues weaken confidence in traditional assets. Additionally, with U.S. debt levels and deficits rising, some investors (and now even state governments like Texas) see value in a non-sovereign asset like Bitcoin to diversify reliance on fiat. Culver City can cite these macro trends when justifying an inflation-hedging reserve.
- Institutional Adoption: We’re witnessing increased institutional adoption of Bitcoin in 2024–25. Multiple major financial firms (BlackRock, Fidelity, etc.) have applied for or launched Bitcoin exchange-traded funds (ETFs) pending regulatory approval. If a U.S. spot Bitcoin ETF is approved (which many expect by 2024 or 2025), it will further validate BTC in traditional finance and possibly increase its price and stability due to more liquidity and participation. The city should keep an eye on these developments. Interestingly, if a Bitcoin ETF becomes available, the city could even consider investing via the ETF for simplicity – though direct ownership has the advantage of not relying on an ETF custodian and avoiding management fees. Still, the presence of an ETF could provide another option for the city’s finance officers if they deem it easier to handle from an accounting perspective.
- Global and National Trends: Globally, more countries and large entities are accumulating Bitcoin (either openly or quietly). This includes some sovereign wealth funds and corporations adding BTC to their treasuries . This trend contributes to making Bitcoin a more mainstream asset class. The total supply of Bitcoin is fixed, so increased demand from such players over time can exert upward pressure on price (Chainalysis notes that even modest accumulation by nations could reduce circulating supply and potentially drive long-term appreciation ). For Culver City, being ahead of the curve means potentially benefiting from this macro dynamic if it holds through the long term.
Regulatory Climate (U.S. and California): The regulatory outlook is a mix of crackdowns on bad actors and clarity for established assets:
- Securities Regulation: The U.S. SEC in 2023–2024 has taken action against several crypto tokens and exchanges, arguing many tokens are unregistered securities. Bitcoin, however, has been consistently excluded from these enforcement actions, as it is generally accepted not to be a security. So Bitcoin stands in a unique regulatory sweet spot: it’s treated as a commodity and even top regulators have publicly stated its legal status is not in question. This is a crucial distinction – it means Culver City is not touching the assets under the most regulatory cloud (unlike say investing in some new DeFi token which could be halted by the SEC). The city should still ensure any service providers (exchanges, custodians) it uses are compliant with AML/KYC rules to avoid any regulatory tangles.
- Federal Legislation: There have been numerous bills proposed in Congress to regulate crypto (ranging from stablecoin rules to comprehensive frameworks), but none have passed yet as of 2024. Executive agencies under the Biden administration issued reports in 2022 calling for balanced crypto regulation, and a 2023 White House economic report was somewhat skeptical of crypto. However, political support is growing in parts of Congress for reasonable regulation rather than heavy-handed bans. Post-2024 elections, there could be more clarity if crypto-friendly lawmakers gain influence. Meanwhile, the possibility of a central bank digital currency (CBDC) or new Fed payment systems could arise, but Bitcoin’s role as “digital gold” is distinct from those. Culver City doesn’t need to worry about federal prohibition of holding Bitcoin – if anything, the aforementioned Executive Order from March 2025 calling for a U.S. Strategic Bitcoin Reserve (under a new administration) indicates increasing federal acceptance, even advocacy, for holding BTC. That order (though at the national level) frames Bitcoin as a unique reserve asset the U.S. should maintain for strategic advantage , which philosophically aligns with what Culver City is aiming to do at a micro scale.
- California State Regulation: California’s DFPI is implementing the Digital Financial Assets Law (DFAL) by 2025, which will require crypto businesses to be licensed in the state (similar to New York’s BitLicense) . By July 2025, any exchange or custodian serving the city must either have this license or be in the application process. This actually helps Culver City, because it will weed out weaker operators and ensure the city works only with well-regulated firms. The DFPI has also put in consumer protections like a $1,000 daily limit on crypto ATM transactions – while not directly affecting a city reserve, it shows the state’s cautious approach to protect individuals. If anything, it underlines that the city should also think of public perception and education (e.g. ensure residents understand this reserve is being handled with institutional-grade security, not like a risky retail crypto scheme).
- Legal Uncertainties: One area of uncertainty is how California’s constitutional rules (like debt limits or public fund “gift” clauses) might apply. Accepting a donation of Bitcoin for public use is straightforward (no different than accepting a donation of stock or art), but investing public funds might raise questions. The city should ensure its actions don’t conflict with any state constitutional provisions or require voter approval (for example, issuing bonds to buy Bitcoin would likely be disallowed as NYC discovered). Keeping it a small, reserve allocation likely avoids those issues.
Climate in California specifically: California, being home to much of the tech and crypto industry, paradoxically has been cautious at the government level. However, things are changing:
- The state government, under Governor Newsom, has generally taken a study-and-regulate stance (Newsom vetoed a previous BitLicense-style bill in 2022 asking for more comprehensive strategy; by 2023/2024, a new law was passed).
- There’s interest in blockchain for government use cases (like record-keeping, DMV, etc.), even if not yet in investing. Culver City’s initiative could align with California’s innovation ethos if pitched correctly. Perhaps framing it as part of remaining competitive in the tech economy would resonate (e.g. “Silicon Beach” region cities like Culver City should be friendly to Web3 innovation).
- Local governments in California have begun dipping toes: for instance, the City of Berkeley explored blockchain municipal bonds (micro-bonds) to democratize financing, which, while different from holding Bitcoin, shows receptiveness to crypto tech in public finance. Culver City’s plan is another dimension of that same innovation.
Summary of the Environment: The 2024–2025 period is one of cautious acceptance and normalization of crypto:
- Bitcoin is increasingly seen as a legitimate asset (with states and even the U.S. government moving to hold it ).
- The legal framework is tightening around crypto (which is good for a city wanting to do this properly).
- The market is perhaps in a middle phase – past the extreme hype of 2021 and the crash of 2022, moving into a more stable growth and institutional adoption phase by 2025.
For Culver City, these conditions are favorable to act. The city can leverage the current lower prices and build its reserve before a potential next major crypto market expansion. It can do so knowing that regulators are focusing on consumer protection and bad actors, not on punishing prudent institutional holders of Bitcoin. And it can position itself as a leader in an environment where many governments are now slowly stepping into crypto – meaning it won’t be an outlier, but rather part of an emerging wave.
Staying attuned to ongoing developments is key. The strategic plan should be reviewed annually to adjust for any major regulatory or market changes (for example, if Bitcoin were to become extremely highly correlated with something that affects city revenues, or if laws change to allow greater investment flexibility, etc.). But as of 2025, the path is open for a well-designed municipal Bitcoin reserve, and the timing may in fact be optimal to initiate this project.
Summary of Recommendations
In conclusion, establishing a Bitcoin reserve for Culver City is an achievable and potentially beneficial endeavor, provided it is approached strategically. Below is a summary of key recommendations derived from the above analysis:
- Define Clear Purpose and Goals: Articulate upfront why the city is creating a Bitcoin reserve and how it will serve the public. Emphasize the four objectives – long-term growth, inflation hedge, diversification of treasury, and emergency fund backup – and tie them to Culver City’s fiscal health and community well-being. A well-defined purpose (e.g. “This reserve is a 10-year investment to strengthen our emergency reserves and future-proof the city against inflation”) will guide all decisions and help earn public trust.
- Start Small and Scale Gradually: Limit the initial size of the Bitcoin reserve to a prudent percentage of city reserves (on the order of 1% or roughly around $1 million, as a starting point). This ensures that even in a downside scenario, core city services and contingency funds are not jeopardized. Plan for gradual accumulation (through periodic small purchases or contributions) rather than a large one-time allocation. Monitor the reserve’s value relative to city finances and consider modest increases only as confidence and legal clarity grow.
- Leverage Donations and Non-Tax Funding: Wherever possible, seed and grow the reserve via private contributions or windfall funds instead of drawing from the operating budget. Set up a mechanism (city-controlled crypto wallet or trust account) to accept Bitcoin donations from individuals, local companies, or grants. Promote this option to crypto philanthropists. Matching funds or budget allocations can be considered later if needed, but building the fund with voluntary inflows first will minimize political controversy and comply with any legal limitations on public fund investment.
- Seek Legal Authorization and Adhere to Regulations: Proactively address the legal framework:
- Consult with the City Attorney and California state officials to ensure the reserve is structured in compliance with current laws. If needed, pursue a state legislative exemption or pilot authorization for Culver City to hold crypto as part of its treasury strategy.
- Ensure any crypto service providers (exchanges for purchasing, custodians for storage) are properly licensed (DFPI license in CA, or federal charter) to avoid regulatory issues. For example, use only U.S.-regulated custodians as New Hampshire’s law prescribes .
- Develop a formal City Council resolution or ordinance establishing the reserve, detailing its funding sources, management, and oversight. This provides a strong legal basis and transparency.
- Remain updated on evolving laws (like California AB 1052 allowing crypto payments or any new state-level investment guidelines) and be ready to adjust the program if necessary to remain compliant.
- Implement Robust Governance and Oversight: Set up a governance structure to manage the reserve responsibly:
- Form a Bitcoin Reserve Advisory Committee consisting of city officials (e.g. the CFO/City Treasurer), and external experts in finance/crypto. This committee can recommend investment timing, review security practices, and report on performance. It mirrors Texas’s approach of using an advisory board for their reserve .
- Establish internal controls that any decision to use or liquidate part of the reserve requires multiple levels of approval (City Manager, Council vote if above certain threshold, etc.).
- Schedule regular reporting intervals – e.g. quarterly updates on the reserve’s value and an in-depth annual report of the reserve’s status, actions, and any realized gains/losses (Texas, for instance, requires a public report every two years ).
- Subject the reserve to the city’s annual audit process, having auditors verify the existence and integrity of the assets.
- Prioritize Secure Custody and Key Management: Treat security as paramount:
- Opt for a multi-signature cold storage solution for holding the Bitcoin. Use at least a 2-of-3 multisig with hardware wallets, distributing keys among trusted parties (e.g., City Treasurer, City Clerk, external auditor) and secure locations. This prevents any single point of failure or misuse.
- Alternatively or additionally, engage a reputable institutional custodian for professional-grade security and insurance. If using a custodian, maintain some form of shared control (for instance, retaining one key in a multisig or having view-only access with manual approval for withdrawals) to ensure city oversight.
- Implement detailed operational security protocols: no single person ever handling a transaction alone, secure physical storage for devices and backup seed phrases, and immediate revocation procedures if personnel changes occur.
- Consider purchasing insurance coverage for the crypto assets if available and cost-effective, to cover losses from theft or custody breach.
- Mitigate Risks through Policy Design: Address volatility and usage of the reserve through clear policy rules:
- Commit to a long-term holding period (suggest a minimum of 5 years before any non-emergency use, with a target of 10+ years) to underscore that the reserve is for strategic purposes, not trading.
- Define the specific conditions under which the Bitcoin may be drawn upon. For example: “Funds may only be accessed in a declared fiscal emergency or natural disaster after other contingency funds are exhausted, or once the reserve’s value exceeds $X million, at which point up to Y% of gains may be reallocated to critical infrastructure or pension stabilization” – tailor this to city needs. Having such triggers (like Roswell’s $1M emergency fund threshold) guards against ad-hoc dips into the reserve.
- Limit rebalancing or profit-taking unless predetermined criteria are met. The city could decide, for instance, if the reserve doubles, it will sell 10% to capture gains for the general fund, or conversely, if the value falls by half, it will hold and not add more unless Council approves. These guardrails remove emotion from decision-making.
- Incorporate an exit strategy clause: if after a number of years the experiment is deemed unsuccessful or too risky (perhaps due to regulatory changes or if Bitcoin’s role shifts), the city can unwind the reserve in an orderly manner.
- Transparency and Public Engagement: Bring the community along to build support and understanding:
- Announce the initiative with a clear communication campaign, explaining in plain terms what a Bitcoin reserve is and why the city is doing it. Emphasize public benefits (stronger emergency funds, financial innovation, potential for new revenues without raising taxes, etc.).
- Provide educational resources or workshops about cryptocurrency to demystify it for the public and even for city staff. An informed community is less likely to panic at normal market swings and more likely to take pride in the city’s forward-thinking approach.
- Maintain an open dashboard or webpage with up-to-date info on the reserve (value, any transactions, current policy documents, FAQ). Transparency will be the best defense against criticism; it shows the city has nothing to hide and is treating this responsibly.
- Be responsive to feedback – perhaps establish a mechanism for residents to ask questions or express concerns and have the city address them. Public trust can be bolstered if people feel heard and see the city being diligent.
- Leverage Expertise and Partnerships: Don’t go it alone – use external expertise to strengthen the project:
- Collaborate with other governmental entities that have done or are attempting similar projects (for example, reach out to Roswell officials or the Texas Comptroller’s crypto team). Learn from their experiences and even consider joint initiatives (like advocating together for supportive state/federal policies).
- Partner with local universities (UCLA, USC, etc.) or community colleges to perhaps involve faculty or students in research around the reserve – whether it’s technical (security audits) or economic (impact analysis). This could provide valuable insights and also demonstrate academia-community collaboration.
- Engage professional advisors for initial setup: crypto custody specialists for security setup, legal counsel specialized in digital assets for regulatory navigation, and investment consultants for integrating this reserve into the city’s overall portfolio strategy.
- Foster public-private partnerships where appropriate, e.g. allow a tech company to sponsor aspects of the program (like Fort Worth’s partnership that provided mining equipment ). Perhaps a local exchange could sponsor custodial fees or a blockchain company could fund community outreach about the reserve. Such partnerships can reduce city costs and deepen the innovation ecosystem locally.
- Monitor, Adapt, and Lead by Example: Treat the Bitcoin reserve as a dynamic project:
- Continuously monitor the reserve’s performance and the crypto market/tech developments. Adjust strategies as needed – for instance, if new security tech arises (like multi-party computation custody or advances in quantum-resistant crypto practices), update the city’s custody approach.
- Stay adaptable to policy changes: if California suddenly authorizes broader crypto uses or conversely imposes restrictions, be prepared to shift gears in compliance.
- Document the outcomes and lessons. After a couple of years, Culver City can publish a whitepaper or case study on its Bitcoin reserve – this not only helps internally (assessing if objectives are being met) but also positions the city as a thought leader. Given many municipalities are watching this space, Culver City’s experience could influence state-wide or even national best practices.
- Celebrate successes (for example, if the reserve appreciates significantly and strengthens the city’s financial position or funds a vital emergency project, publicize that outcome). Conversely, if challenges occur, address them openly and show how the city is mitigating them. This honest approach will maintain credibility.
By following these recommendations, Culver City can prudently implement a Bitcoin reserve that complements its fiscal strategy and community goals. The plan emphasizes caution, legal compliance, and security at every step, while also recognizing the innovative potential and upside of embracing cryptocurrency in a measured way. If executed well, Culver City’s Bitcoin reserve could become a model for municipal financial innovation – one that bolsters the city’s resilience and showcases its leadership in the modern digital economy.
