Trump Orders Exploration of a U.S. Cryptocurrency Stockpile
WASHINGTON, Jan 24 (Reuters) – President Donald Trump has directed the creation of a digital asset working group tasked with exploring a U.S. cryptocurrency stockpile, sparking interest and debate within the financial sector.
An illustration featuring U.S. President-elect Donald Trump holding Bitcoin is displayed outside a cryptocurrency exchange store after Bitcoin soars above $100,000, in Hong Kong
Trump’s order, issued on Thursday, mandates the working group to submit a report by July outlining the criteria for such a stockpile. The initial focus will be on cryptocurrencies seized by the federal government.
The potential move has garnered mixed reactions. Some market participants expressed disappointment that Trump did not immediately begin accumulating a Bitcoin strategic reserve.
What is a Strategic Reserve?
A strategic reserve is a supply of a crucial resource that can be deployed during times of crisis or supply disruptions. The most well-known example is the U.S. Strategic Petroleum Reserve, established in 1975 after the Arab oil embargo. This reserve has been tapped by presidents to stabilize oil markets.
How Would a U.S. Strategic Bitcoin Reserve Work?
The order offers little detail on the potential scope or structure of a cryptocurrency reserve. The working group will assess deriving a stockpile from assets seized through law enforcement efforts. Currently, this could amount to approximately 200,000 tokens, valued at about $21 billion.
Further instructions on whether the government would acquire more Bitcoin in the open market are not provided in the order. The legal process to manage these assets also remains unclear.
A prominent proposal comes from Republican Senator Cynthia Lummis, a vocal proponent of cryptocurrency and a holder of Bitcoin. She introduced a bill in July that would create a Treasury-operated reserve, buying 200,000 bitcoins annually for five years, eventually amassing a million tokens. This would amount to about 5% of the total global Bitcoin supply. The bill envisions funding the purchases with profits from Federal Reserve banks’ deposits and gold holdings; the reserve would be maintained for at least 20 years.
Benefits of a Bitcoin Reserve
During a July speech, Trump suggested that a Bitcoin reserve would help the U.S. dominate the global market against growing competition from China. Proponents also argue that a Bitcoin reserve would help to reduce the U.S. deficit, thus strengthening the U.S. dollar.
Senator Lummis has stated this plan could cut the U.S. debt in half within 20 years. A strong dollar, supporters claim, would create more leverage against foreign adversaries.
Risks
Skeptics point out that, unlike most other commodities, Bitcoin has no intrinsic use and is subject to high volatility. They also raise concerns about the cyber vulnerability of crypto wallets, and believe that government transactions, purchases, or sales could impact Bitcoin’s price.
