Trump’s Bold Vision for a USD-Backed Fund with a Bitcoin Reserve
In Brief
President Trump signs Executive Order for US Sovereign Wealth Fund, requiring government representatives to propose governance model, investment strategies, and fund structure within 90 days.
An Executive Order has been signed by President Donald J. Trump to begin the process of establishing a Sovereign Wealth Fund (SWF) for the US. The decision could indicate a change in the country’s financial policy as it requires important government representatives to provide a detailed plan within ninety days. The upcoming proposal will focus on the governance model, investment strategies, and fund structure.
The Executive Order places duties on the Secretary of Commerce and the Secretary of the Treasury, requiring them to work with the Assistant to the President for Economic Policy and the Director of the Office of Management and Budget. In order to improve economic stability, their suggestions will dictate how the fund is funded, run, and leveraged.
An Innovative Financial Strategy for the US
Other countries have long utilized sovereign wealth funds to boost economic growth and national financial stability. These funds reduce fiscal risk and boost financial resilience by pooling national resources and investing them to generate long-term profits. Despite having one of the biggest economies in the world, the US has never had a formal SWF.
The federal government now has $5.7 trillion in direct assets, but its indirect holdings, which include land, natural resources, and strategic reserves, are worth significantly more. Nearly 28% of the nation’s territory, or more than 640 million acres, is under the management of the U.S. government, and a large portion of this territory is rich in natural resources. To guarantee more economic sustainability, these assets might be combined and invested in the proposed SWF.
The United States may ensure that resources are used effectively while reducing the tax burden on individuals and corporations by establishing an SWF. Investments might be made in long-term-benefitting financial instruments, infrastructure projects, and sectors that foster innovation.
The Sovereign Wealth Fund’s Use of Bitcoin
This initiative’s possible emphasis on Bitcoin (BTC) as a reserve asset is one noteworthy feature. Digital assets are becoming more and more important in investment strategies and financial stability, as seen by recent global economic developments. Since Bitcoin is decentralized and resistant to inflationary pressures, it has been accepted as a reserve by a number of businesses and even certain governments.
Although the scope of Bitcoin’s involvement in the U.S. SWF is yet unknown, the potential inclusion of BTC might have major implications. The adoption of digital assets at the highest levels of government finance would be represented by this plan if it were put into practice.
Bitcoin is an attractive commodity for national reserves due to its decentralized nature and restricted quantity of 21 million coins. Both traditional banking and the cryptocurrency industry may be impacted by its possible inclusion in a U.S. SWF, which might have an impact on international markets. With a market valuation of over $800 billion as of early 2024, Bitcoin is among the most valuable assets in the world.
Global Trends and Competitive Aspects to Consider
Sovereign wealth funds have long been handled by countries like China, Norway, and the United Arab Emirates to support their domestic economies. One of the biggest and most prosperous SWFs, the Norwegian Government Pension Fund Global, is worth over $1.4 trillion and has produced average annual returns of 5.8% over the last ten years.
The China Investment Corporation (CIC), China’s sovereign wealth fund, oversees more than $1.2 trillion in assets and places an emphasis on international investments to spread risk. In the same way, the Abu Dhabi Investment Authority leverages the country’s oil resources to ensure long-term financial stability, holding assets worth over $700 billion.
The idea that SWFs are becoming a crucial instrument for economic management has been further supported by the UK’s announcement of plans to create one. As the greatest economy in the world, the United States can adopt an SWF that is on line with or better than those of other countries.
There are currently 23 states in the US that run their own SWFs, handling $332 billion in assets between them. For instance, the Alaska Permanent Fund, which was created in 1976 and currently has over $75 billion, pays out dividends to locals each year from investments made with oil revenue.
Possible Advantages for National Security and Economic Growth
An effective tool for national growth may be a U.S. SWF. Large-scale infrastructure projects, technical developments, and renewable energy projects may all be supported using the fund, guaranteeing that wealth creation serves more general strategic and economic goals.
An SWF may improve financial self-sufficiency and lessen reliance on foreign funding, which would enhance national security in addition to economic progress. Being able to oversee a diverse investment portfolio would increase resilience to shocks to the world economy.
Obstacles and Things to Consider Further
There are additional difficulties in establishing a U.S. SWF. Carefully planning governance frameworks is necessary to guard against poor management and guarantee openness. Strong monitoring is crucial, as demonstrated by past instances like corruption scandals involving Malaysia’s 1MDB fund.
To handle volatility and cybersecurity concerns, new regulatory frameworks would be needed for the incorporation of Bitcoin or other digital assets. The price of bitcoin has fluctuated greatly, from less than $4,000 in 2020 to over $68,000 in 2021, before leveling out in the following years at between $40,000 and $50,000.
The shape of the fund will be heavily influenced by political factors and public opinion. Bipartisan collaboration and well-defined rules that put long-term financial sustainability first will be essential to the SWF’s efficacy.
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About The Author
Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
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Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
