- Donald Trump previously referred to bitcoin as “a scam.”
- Last year, he shifted his view and committed to establishing a government-operated bitcoin reserve.
- This reserve is now a reality. What is its intended purpose, and why should the U.S. maintain one?
The U.S. has a strategic bitcoin reserve.
Question: What exactly is a strategic bitcoin reserve?
More pressing question: Why should the U.S. establish a strategic bitcoin reserve?
Spoiler alert: I’ve been pondering this for a while, and I’m still struggling to grasp it.
Others seem confused as well. “It remains unclear how such a reserve would operate or how it would benefit taxpayers,” Reuters reported on Thursday.
And while I don’t typically liken myself to Donald Trump, I couldn’t help but mirror the expression he made Thursday when someone explained something I found hard to understand. “Is this something you actually believe in?” he questioned David Sacks, his crypto advisor, before endorsing the executive order that formed the reserve.
To clarify: I understand what the reserve is meant to represent. I also recognize why Trump approved its establishment.
The president, who had labeled bitcoin “a scam” in the past, altered his perspective on crypto last year — he even launched his own cryptocurrency — and vowed at a bitcoin gathering in Nashville to create the reserve. His change of heart coincided with the crypto sector rallying behind his campaign. (Though he still didn’t appear to be a true supporter back in April: “Enjoy your bitcoin and your crypto and everything else you’re experimenting with,” he told attendees as he exited the stage.)
However, I fail to see the rationale behind a strategic reserve.
The U.S. already possesses a significant amount of bitcoin, mainly obtained through asset forfeiture during legal processes. These coins are now intended to feed into the reserve, which the government is expected to retain indefinitely.
Some cryptocurrency enthusiasts speculated that Trump’s plan involved purchasing more bitcoin, but that doesn’t appear to be the current direction. Though the order leaves some room for interpretation, as it encourages Trump’s Cabinet members to “develop budget-neutral strategies for acquiring additional bitcoin.”
If you explore cryptocurrency enthusiasts’ reactions to the news, you’ll find a mixed bag: some are disappointed by the absence of an immediate plan for the U.S. to acquire more bitcoin — which could elevate prices. Others believe it’s a positive move for the U.S. to actively support bitcoin instead of labeling it “a scam.”
What I haven’t encountered — and I welcome any insights if you have them — is a convincing argument for why this constitutes sound policy.
Sacks and others argue that this is akin to the U.S. holding gold in Fort Knox or maintaining reserves of other valuable resources, such as oil. But to what purpose? The government’s history with gold is intricate and longstanding. It stocks up on oil for emergency preparedness. I don’t see a similar justification for crypto.
I also perceived one of crypto’s fundamental concepts to be enabling asset creation without government intervention. This situation certainly seems like government involvement. By owning a considerable amount of bitcoin and pledging not to sell it, the government appears to be actively backing bitcoin.
Look, I’m not a cryptocurrency authority. So over the past few days, I reached out to various crypto experts—who are also supporters of Trump 2.0’s pro-crypto stance—to shed light on the rationale behind the reserve, and … I was unable to engage them in discussion, even off the record.
This reaction doesn’t necessarily indicate anything definitive. However, it leads me to believe that even some crypto advocates may not be entirely convinced by this initiative. Let’s see if attitudes change regarding this concept in a year or so.
