{ “title”: “Trump Orders Digital Asset Working Group to Explore U.S. Cryptocurrency Stockpile”, “description”: “Former President Donald Trump has directed a working group to examine the feasibility of a U.S. strategic reserve derived from cryptocurrencies, sparking debate among market participants and policymakers.”, “tags”: “Donald Trump, Bitcoin, Cryptocurrency, Strategic Reserve, Cynthia Lummis”, “rewritten_content”: “WASHINGTON, Jan 24 (Reuters) – Former President Donald Trump has ordered the creation of a digital asset working group with the goal of exploring a U.S. cryptocurrency stockpile. This development has ignited discussions among market participants and policymakers.
Trump’s order directs the group to deliver a report by July, outlining criteria for such a stockpile. This could potentially involve cryptocurrencies seized by the federal government.
Some in the market expressed disappointment that Trump did not immediately begin accumulating a Bitcoin strategic reserve. Several key aspects of the proposal are under scrutiny:
What is a Strategic Reserve?
A strategic reserve is a carefully maintained supply of a crucial resource. It’s designed to be released in times of crisis or supply disruptions. A well-known example is the U.S. Strategic Petroleum Reserve. This reserve is the world’s largest supply of emergency crude oil. Congress created it in 1975 after the Arab oil embargo of 1973-74 severely impacted the U.S. economy. Presidents have utilized this stockpile to stabilize oil markets during wartime and when hurricanes have damaged oil infrastructure along the U.S. Gulf of Mexico.
Canada maintains the world’s only strategic reserve of maple syrup, while China has strategic reserves of metals, grains, and even pork.
How Would a U.S. Strategic Bitcoin Reserve Function?
Trump’s directive offers few specifics on the structure or scope of the proposed Bitcoin reserve. The working group is tasked with evaluating the possibility of deriving the stockpile from cryptocurrencies seized through law enforcement actions. Currently, such holdings amount to approximately 200,000 tokens, with a market value of about $21 billion, according to bitcointreasuries.net. Uncertainty surrounds the legal processes involved in transferring these assets out of the Justice Department.
Trump has not indicated whether the government would supplement the stockpile by purchasing more Bitcoin on the open market, and the order provides no further specific instructions.
The most concrete proposal for a Bitcoin reserve circulating in Washington comes from Republican Senator Cynthia Lummis, an outspoken advocate for cryptocurrency who personally owns five Bitcoins. Last July, she introduced a bill, which has yet to progress, that would establish a reserve managed by the Treasury. Her proposal would have the Treasury purchase 200,000 Bitcoins annually for five years, eventually accumulating a stockpile of one million tokens. This would represent around 5% of the total global supply of Bitcoin, which is approximately 21 million. The Treasury would fund these purchases using profits from Federal Reserve banks’ deposits and gold holdings. The Bitcoin reserve would then be maintained for a minimum of 20 years.
What are the Benefits of a Bitcoin Reserve?
During a July speech, Trump suggested that a Bitcoin reserve could help the U.S. dominate the global Bitcoin market. He cited increasing competition from China as a driving factor. Other proponents argue that holding a Bitcoin stockpile, which they believe will appreciate over time, could help the U.S. reduce its deficit without raising taxes, thus strengthening the U.S. dollar.
In November, Lummis told Fox Business that her plan would enable the United States to cut its debt in half within 20 years. She stated, “That helps us protect ourselves against inflation and protect the U.S. dollar on the world stage.” Proponents further suggest that a strong dollar would enhance the United States’ leverage over foreign adversaries like China and Russia.
What are the Risks?
Skeptics of cryptocurrencies contend that, unlike most other commodities, Bitcoin lacks intrinsic use and is not critical to the functioning of the U.S. economy. They argue that, since its creation in 2008, Bitcoin is too young and volatile to guarantee long-term value appreciation. They also point out that crypto wallets remain vulnerable to cyberattacks. Furthermore, given Bitcoin’s inherent volatility, any government purchases or sales could have a significant impact on its price. “
