Donald Trump's Bitcoin Reserve A 'Digital Fort Knox'
President Donald Trump has taken a significant step in his administration's support for the cryptocurrency sector by signing an executive order establishing a "Strategic Bitcoin Reserve" in the United States. The reserve, which is expected to be funded by about 200,000 bitcoins worth around $17 billion, has been likened to a digital Fort Knox by White House crypto chief David Sacks.
The creation of this strategic reserve marks further proof of Trump's commitment to the cryptocurrency sector, which has been gaining momentum in recent years. The reserve will be virtually secured for an indefinite time, with additional bitcoin able to be added as long as such action is "budget-neutral" and does not cost taxpayers. This move aims to provide a safe-haven asset for the US government, protecting against financial instability and stabilizing its currency.
How Will The US Bitcoin Reserve Work?
The reserve will be funded by approximately 200,000 bitcoins that have been seized in the United States as a result of civil and criminal cases. These assets are expected to be valued at around $17 billion. The reserve's initial value is not expected to significantly impact the overall market price of bitcoin.
However, analysts have pointed out that the lack of immediate buying action following Trump's executive order led to an initial drop in bitcoin prices. It remains to be seen whether the US government will add more bitcoin to the reserve or if other digital tokens will be included, as per the executive order. Trump has mentioned that Bitcoin's nearest rival, ether, along with three other tokens -- XRP, Solana, and Cardano -- could potentially be added to the reserve.
Critics Weigh In On The US Bitcoin Reserve
Some critics argue that unlike gold, cryptocurrencies are risky assets with no intrinsic value. However, White House crypto chief David Sacks believes that by storing bitcoin over time, the government would protect itself from the cryptocurrency's massive short-term volatility.
Additionally, Stephane Ifrah, an investment director at crypto platform Coinhouse, points out that bitcoin can profit from its rarity thanks to a limited 21 million tokens. An 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.
Concerns Of Conflict Of Interest
Prominent cryptocurrency critic Molly White believes that the "true reason" for the reserve "is a way to drive interest in the crypto industry," which could 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."
Furthermore, there have been reports that the Trump family discussed acquiring a possible stake in the Binance platform -- a report denied by the crypto exchange's founder. Brazil is also considering the creation of a cryptocurrency reserve, an idea recently ruled out by the Swiss central bank.
A Global Trend In Cryptocurrency Reserves
Governments around the world are partaking in cryptocurrency activity, notably by selling digital assets seized in court cases. For instance, Germany sold 50,000 bitcoins last year. El Salvador made bitcoin one of its official currencies before reversing the decision this year due 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. This trend highlights the growing interest in cryptocurrency reserves and digital assets among governments worldwide.