Trump’s Bitcoin Reserve: A Digital Fort Knox for the Cryptocurrency Sector
In a move that has left many in the cryptocurrency sector buzzing, President Donald Trump has signed an executive order establishing a "Strategic Bitcoin Reserve" in the United States. The reserve, likened to a digital Fort Knox by White House crypto chief David Sacks, is expected to be funded by approximately 200,000 bitcoins, worth around $17 billion in total.
The bitcoin reserve will be virtually secured for an indefinite time and can be topped up as long as the addition is "budget-neutral," meaning it does not cost taxpayers. However, critics of the move have pointed out that unlike gold reserves, which are seen as a safe-haven asset, cryptocurrencies are considered risky assets with no intrinsic value.
Stephane Ifrah, an investment director at crypto platform Coinhouse, believes that by storing bitcoin over time, the government would protect itself from the cryptocurrency's massive short-term volatility. He also noted that bitcoin, like gold, can profit from its rarity thanks to a limited 21 million tokens.
How Will the US Bitcoin Reserve Work?
The bitcoin reserve will be funded by approximately 200,000 bitcoins, worth around $17 billion in total, that have been seized in the United States as a result of civil and criminal cases. The reserve will be virtually secured for an indefinite time, but additional bitcoin can be added to the reserve as long as such action is "budget-neutral."
According to Aubert, the US government must return bitcoin to all victims identified as suffering from a hack. Around 198,000 tokens are estimated to be held by the United States — and would have to be returned to the victims of a hack at crypto exchange Bitfinex in 2016.
A Big Reason for Copying Gold Reserve?
Critics of the US bitcoin reserve point out that unlike gold, cryptocurrencies are risky assets with no intrinsic value. However, Ifrah believes that storing bitcoin over time would allow the government to protect itself from the cryptocurrency's massive short-term volatility.
Additional Benefits
Another advantage of the bitcoin reserve is its transparency, as the level of tokens will be known at all times — unlike the amount of gold placed in Fort Knox. Additionally, with the bitcoin reserve, "we're dealing with a rare asset that's much more suited to today's world," Ifrah said.
The True Reason Behind the Reserve?
Some experts believe that the true reason behind the creation of the US bitcoin reserve is to drive interest in the crypto industry and financially benefit investors. Trump has been accused by some of showing a conflict of interest, having vowed ahead of being elected to make the United States the "bitcoin and cryptocurrency capital of the world."
Other Governments Taking Note
Governments around the world are taking note of the US bitcoin reserve. Brazil is also considering the creation of a cryptocurrency reserve, an idea recently ruled out by the Swiss central bank.
El Salvador made bitcoin one of its official currencies, reversing the decision this year owing to a lack of take-up by citizens. Bhutan holds nearly $900 million worth of bitcoin, equivalent to nearly 30 percent of the kingdom's gross domestic product.
The Future of Cryptocurrencies
As the world becomes increasingly digital, it is clear that cryptocurrencies are here to stay. With the US bitcoin reserve being just one example of governments taking a closer look at this space, we can expect to see more innovations and developments in the coming years.
Conclusion
In conclusion, President Trump's signing of an executive order establishing a "Strategic Bitcoin Reserve" is a move that has sent shockwaves through the cryptocurrency sector. While some have praised the initiative as a way to drive interest in the crypto industry and financially benefit investors, others have raised concerns about the potential risks involved.