Does the United States have a legitimate strategic reserve in Bitcoin?

Bitcoin is often marketed as an alternative to the US dollar, the global reserve money, because of its restricted creation. Proponents argue that bitcoin is an inflation-proof value storage that is apart from the global financial system due to its fixed quantity. Bitcoin and gold are often compared for the same reason.

Only one country—El Salvador—has created a strategic cryptocurrency reserve thus far, despite the fact that central banks all over the world keep substantial amounts of gold and dollars. Cryptocurrencies are held by a number of nations, nevertheless, mostly those that have been seized from illegal activities or to circumvent international sanctions.

The measures have been met with enthusiasm from cryptocurrency proponents, while others argue that they will expose US taxpayers to the high price volatility of virtual currencies.

On Friday, Trump will host a summit with the top bitcoin sector leaders. DW looks into the president's intentions.

To what extent do we understand Trump's approach?

According to David Sacks, Trump's "crypto czar," the federal government will keep the nearly 200,000 bitcoin that were seized in criminal and civil proceedings as per Trump's directive.

"The United States will not sell any bitcoin that is deposited into the Reserve. It will be kept as a store of value. "The Reserve is like a digital Fort Knox for the cryptocurrency often called 'digital gold,'" Sacks wrote on X, referring to the storage facility in Kentucky that houses the majority of the US gold reserves.

According to Sacks, the government's bitcoin assets have never been thoroughly audited, and the executive order calls for a "full accounting" of them. Over the past decade, Washington has sold off about 195,000 bitcoins for $366 million, which, if held, would be worth about $17 billion, Sacks continued.

Following years of deceptive attacks by the Biden Administration, Trump tweeted on his Truth Social platform, "A US Crypto Reserve will elevate this critical industry." "I will ensure that the United States becomes the global centre for cryptocurrency."

The idea of a strategic stockpile was first put forth by Trump in July at the Bitcoin 2024 Conference in Nashville, Tennessee. Trump is now showing increasing interest in alternative currencies, despite his early resistance to them.

Can a crypto-stockpile be effective?

A crypto strategic reserve, according to its proponents, could contribute to financial stability by diversifying US national reserves beyond conventional assets like gold and foreign currencies.

More financial institutions would be encouraged to hold cryptocurrencies if they were given legitimacy by such a stockpile. Because of their decentralization and price volatility, many institutional investors continue to view cryptocurrency like bitcoin with suspicion.

Others expressed concern that, at a time when Trump is proposing billions of dollars in cuts to the public sector, it would be an expensive endeavor if the government were to purchase Bitcoin close to its all-time high price of $109,000.

Trump was charged by other critics with showing preference for a highly speculative investment without offering any discernible strategic advantages for the country.

The contradiction between building up a government stockpile of an asset that is considered anti-establishment was brought up by some observers. The original purpose of Bitcoin was to circumvent central bank and governmental regulation.

Others were concerned that, similar to how they do with gold and currencies, governments might start manipulating the cryptocurrency market if they started hoarding cryptocurrency like bitcoin.

Since Congress has not yet endorsed the idea and because many of the cryptocurrency that US authorities have seized had lawful owners, Trump now faces significant legal and political obstacles before the stockpile becomes a reality.