Trump’s Crypto Reserve: A New Financial Frontier or a Risky Bet?
In Brief
Trump’s crypto reserve aims to be a “digital Fort Knox,” sparking debate over its potential to reduce debt or pose financial risks, with supporters seeing stability and critics warning of volatility and government overreach.
Trump’s January executive order created a working group to set up a national crypto reserve. A federal reserve would imply active government buying and selling of cryptocurrency.
Supporters argue it could reduce national debt, while critics warn about crypto’s volatility and speculative nature.
Let’s get the facts from both sides.
A Digital Fort Knox
David Sacks, the White House’s AI and crypto director, compared the federal cryptocurrency reserve and “a digital Fort Knox for the cryptocurrency,” suggesting it serves a similar purpose to the Kentucky base where a large portion of US gold is stored.
While some crypto enthusiasts have criticized the government for lacking ambition, others have raised concerns about the transparency of the process.
Sacks has requested a comprehensive audit of the government’s crypto holdings, estimating 200,000 Bitcoin, valued at $17.5 billion.
He expressed regret over not maximizing value for American taxpayers, emphasizing the intention to ensure proper management of the remaining Bitcoin.
A 2nd Gold Reserve?
Prominent cryptocurrency critic, Molly White, believes the “true reason” for the reserve “is a way to drive interest in the crypto industry”, which could financially benefit investors.
Critics argue that, unlike gold, cryptocurrencies are risky and lack intrinsic value. However, David Sacks suggests that holding bitcoin long-term could protect the government from the cryptocurrency’s short-term volatility.
Stephane Ifrah, an investment director at Coinhouse, compared bitcoin’s scarcity to gold, noting its limited supply of 21 million tokens. Ifrah also highlighted the transparency of a bitcoin reserve, as the number of tokens is always visible, unlike the gold in Fort Knox.
However, cryptocurrency critic Molly White believes the reserve is aimed at boosting interest in crypto, potentially benefiting investors financially.
Crypto Enthusiasts in Full Support
Most crypto enthusiasts aren’t looking to stabilize prices—they actually hope a reserve would send them soaring. If the government buys crypto, it would show that digital assets are stable in the long term, encouraging other big financial players and even other countries to jump on board, which could drive prices up.
Some Bitcoin fans also see a reserve as protection against inflation, thinking Bitcoin might hold its value better than the dollar in a global crisis. But with crypto’s history of volatility, some experts, like Austin Campbell, argue the U.S. should focus on getting its financial house in order instead of betting on an asset that could hurt the dollar.
Completely Free
Details about the crypto reserve are expected to come out when the president speaks at the first crypto summit at the White House.
While the exact benefits for Americans remain obscure, Sacks reassured reporters that it “will not cost taxpayers a dime.”
It’s also uncertain whether the reserve could face legal obstacles or need Congressional approval. Sacks clarified that the government would not sell Bitcoin from the reserve, but rather hold it as an asset.
Although the reserve will focus solely on Bitcoin, other cryptocurrencies will be stored separately. His suggestion that the government won’t buy Bitcoin caused its price to drop by over 5%.
Negative Perspectives
Despite the enthusiasm from some quarters, the announcement has drawn strong criticism from others in the crypto world.
Charles Edwards, the founder of the Capriole Fund, called the news “a pig in lipstick,” dismissing the move as little more than a repackaged version of existing Bitcoin holdings within the government. Edwards argued that without active buying, the reserve is just a “fancy title” for Bitcoin already held by the U.S.
Trump’s executive order on the reserve dictates that any acquisition of additional Bitcoin must be “budget neutral” and not contribute to the deficit or national debt. Sacks confirmed that the government is only allowed to purchase more Bitcoin if it doesn’t increase fiscal burdens.
Jason Yanowitz, co-founder of Blockworks, voiced concerns about the inclusion of other cryptocurrencies, calling it a “horrible precedent.” He warned that without clear guidelines, the U.S. could risk distorting the market and losing public trust.
However, some analysts, like Russ Mould of AJ Bell, find the approach more sensible. Mould emphasized that it would be illogical for the U.S. to sell dollars to buy crypto, considering the dollar’s dominance as the global reserve currency.
Yanowitz also stressed the need for transparency, suggesting that independent audits and public reports are crucial to avoid favoritism in the selection of assets. Sacks confirmed that each government department, including intelligence agencies, would need to self-report their cryptocurrency holdings, with no exceptions.
How Will the Reserve Work?
Trump has yet to provide further details on the proposed crypto strategic reserve, but several ideas have emerged. Last year, Sen. Cynthia Lummis of Wyoming introduced a bill aimed at creating a bitcoin reserve, calling for the government to buy 1 million bitcoins over five years, which would be valued at over $86 billion today. Similarly, the Bitcoin Policy Institute presented a proposal for a 1 million-bitcoin reserve to Treasury Secretary Scott Bessent.
However, concerns have been raised about the government becoming a major crypto player. Cornell professor Prasad warned that such a reserve could drive market fluctuations, as the government would influence the price significantly. If it attempted to liquidate its holdings to reduce debt, the value could plummet.
The Bitcoin Policy Institute, however, views the reserve as a long-term strategy for “financial resilience,” arguing that as Bitcoin matures, its volatility will decrease, making it a more stable asset.
Crypto Reserve in Other Countries
Currently, only three countries treat cryptocurrencies as legal tender.
El Salvador became the first in 2021, adopting Bitcoin, though a 2024 Yale study revealed it wasn’t widely used. In January, the government downgraded Bitcoin’s utility for taxes and state bills. El Salvador holds about 6,088 Bitcoin in reserves, valued at $558 million.
The Central African Republic adopted Bitcoin as legal tender in 2022, but its reserves remain unclear.
Bhutan, holding about 11,000 Bitcoin valued at $1.1 billion, has incorporated crypto into its strategic reserves.
Now, the United States will be the fourth country to officially establish a crypto reserve, and only time will tell if this is a turning point or a severe case of overpromising and underdelivering.
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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.
