A recent submission to the U.S. Securities and Exchange Commission’s (SEC) new Crypto Task Force by Maximilian Staudinger argues for XRP to be recognized as a “strategic financial asset” for the United States, relying on questionable math and reasoning.
Allow me to clarify that XRP does not qualify as a strategic asset, and the rationale behind this proposal is, at best, contentious.
In the proposal, Staudinger claims that $5 trillion is held in U.S. Nostro accounts (bank accounts used for international payments). He posits that under certain regulatory frameworks—like the SEC categorizing XRP as a payment network, the U.S. Department of Justice (DoJ) granting legal permission for banks to utilize XRP, and the Federal Reserve requiring banks to adopt XRP as a liquidity option—30% of this capital ($1.5 trillion) could be made accessible for the U.S. government to acquire 25 million bitcoins at a rate of $60,000 each.
Now, let’s dissect why this reasoning is flawed.
To start, Nostro accounts are simply bank accounts that U.S. banks maintain in other countries. It’s unclear what sort of logic would have these banks relinquishing the U.S. dollars that XRP would supposedly replace to the Federal government for the purpose of purchasing bitcoin.
Secondly, the proposal lacks specifics on how these banks would acquire the XRP meant to replace the U.S. dollars. Logically, they would have to buy XRP, which would mean that XRP would absorb the $1.5 trillion, not bitcoin. Even if Ripple, the issuer of XRP, intended to simply provide these banks with XRP, this wouldn’t be feasible as Ripple controls about $100 billion in XRP—far less than the $1.5 trillion.
Furthermore, if bitcoin’s price were to drop to $60,000, the price would likely rise immediately as the U.S. government began purchasing 25 million bitcoins.
Lastly, it’s crucial to remember the fixed supply of 21 million bitcoins (with around 4 million believed to be lost), a well-known fact in the Bitcoin and crypto community. Thus, suggesting that the U.S. government could acquire 25 million bitcoins is absurd. If the author’s claims were made with any seriousness, he might have considered proposing the government purchase 15 million bitcoins at $100,000 each (although the arithmetic still wouldn’t add up).
Considering the substantial flaws in logic within this proposal, it’s challenging to label XRP as a strategic asset. Moreover, why would the U.S. government opt to do so when two-thirds of XRP’s supply remains held by the organization that created it? The rationale simply doesn’t hold up.
Contrastingly, Bitcoin is a widely distributed asset that individuals globally utilize as both currency and a store of value. Additionally, the Bitcoin network is overseen by tens of thousands of nodes, making it incredibly secure, thanks to roughly 0.4% of the world’s energy protecting it. In comparison, the XRP network operates with just 828 nodes and lacks similar energy security. These elements render bitcoin a logical reserve asset, which is how the U.S. government officially categorizes it.
Hopefully, the SEC recognizes the points I’ve made in this article and refrains from dedicating much time to Mr. Staudinger’s proposal.
This article represents a personal opinion. The views expressed are solely those of the author and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
