LONDON: The establishment of a “Strategic Bitcoin Reserve” in the United States underscores President Donald Trump’s endorsement of the cryptocurrency industry. However, this initiative has sparked concerns, with critics accusing the US government of failing to return bitcoin to victims identified as having suffered losses due to a hack.
Earlier this month, Trump issued an executive order to set up the reserve, which White House crypto chief David Sacks described as “a digital Fort Knox,” drawing parallels to the military base’s gold bar stockpiling.
Countries around the world maintain gold reserves, viewing the metal as a safe-haven asset that safeguards against financial instability, such as soaring inflation.
Gold recently surpassed $3,000 per ounce for the first time, propelled by a precarious economic outlook amid Trump’s tariffs.
Gold reserves can also serve to stabilize a nation’s currency, with bars frequently utilized as collateral for loans and transactions.
How will the US bitcoin reserve function?
The reserve will be funded by approximately 200,000 bitcoins, valued at around $17 billion, which have been confiscated in the US from various civil and criminal proceedings.
Additional bitcoin may be incorporated into the reserve as long as such actions remain “budget-neutral.”
Following the signing of the executive order, the price of bitcoin initially dropped but has since stabilized.
Dessislava Aubert, an analyst at crypto data provider Kaiko, informed AFP that the US government is legally obligated to return bitcoin to all identified victims of hacking incidents.
Aubert noted that a substantial portion of the bitcoin held by the US—estimated at 198,000 tokens—must be returned to victims of a hack at crypto exchange Bitfinex in 2016.
Observers of the sector are also eager to see if other digital tokens will be included in the reserve, which the executive order allows.
Trump indicated that bitcoin’s closest competitor, Ether, along with three additional tokens—XRP, Solana, and Cardano—could potentially be added.
Critics caution that unlike gold, cryptocurrencies are volatile assets and lack intrinsic value.
Conversely, White House crypto chief David Sacks argues that by holding bitcoin long-term, the government can shield itself from the cryptocurrency’s inherent volatility.
Meanwhile, Stephane Ifrah, an investment director at crypto platform Coinhouse, stated that bitcoin, similar to gold, benefits from its scarcity due to the capped supply of 21 million tokens.
A notable advantage of the bitcoin reserve is its transparency, as the number of tokens will be publicly known at all times, contrasting with the undisclosed amount of gold stored in Fort Knox.
Published in Dawn, March 17th, 2025
