On the campaign trail, President Donald Trump made a promise to the cryptocurrency entrepreneurs that they have not forgotten: a pledge to be the first “crypto president.”
Last week, Trump took his latest in a string of actions to align himself with the digital asset industry by establishing a strategic bitcoin reserve in an executive order.
“I promised to make America the bitcoin superpower of the world and the crypto capital of the planet,” Trump said at the White House cryptocurrency summit. “We’re taking historic action to deliver on that promise.”
A strategic bitcoin reserve would consist of bitcoin that the federal government seized, according to the executive order. Under the order, the U.S. government would not purchase any more cryptocurrency. To further expand the reserve, the Trump administration authorized the Department of Treasury and Commerce to find other ways to acquire additional bitcoin where no tax dollars would be spent, instead of direct market purchases.
The reserve’s creation signaled a shift in U.S. policy toward bitcoin. Previously, the Treasury sold seized bitcoin rather than holding onto it. By choosing to keep the digital asset, the U.S. government increased its current stake in cryptocurrency and cemented the administration’s allegiance to the industry.
While Trump’s bitcoin policy was in line with what the industry previously advocated for, not all pro-cryptocurrency lawmakers were overjoyed about the reserve.
Early last week, Rep. Ritchie Torres (D-N.Y.) and Majority Leader Tom Emmer (R-Minn.) launched a bipartisan Congressional Crypto Caucus, intending to boost U.S. leadership in cryptocurrency innovation. But despite Torres’ pro-cryptocurrency stance, he said he was “skeptical” about the federal government creating a cryptocurrency reserve.
“I do see blockchain as an emerging technology that has the potential to transform our society for good, but there are two visions of blockchain,” Torres said to Medill News Service. “There’s blockchain as a computer, and then there’s blockchain as a casino. I’m skeptical about blockchain as a casino, and I feel like Donald Trump is promoting speculation that’s going to do more harm than good.”
However, Congressional advocates for the reserve saw it as serving a significant economic purpose and predicted that it would serve as a hedge against inflation.
Sen. Bernie Moreno (R-Ohio), a former blockchain entrepreneur, expressed he was not concerned about bitcoin’s volatility, and instead, worried about the dollar’s devaluation with inflation.
“I’m concerned about the dollar’s volatility,” Moreno told Medill News Service. “A dollar is worth a lot less today than it was five years ago, and bitcoin is worth a lot more today than it was five years ago.”
The claim that bitcoin can act as a hedge against inflation faced scrutiny, however. The cryptocurrency’s value is based solely on speculation, making it a volatile asset.
Other supporters of the government holding onto bitcoin argued the reserve could help reduce the national debt. However, the order specified that the U.S. will not sell the bitcoin within the reserve.
George Selgin, a senior fellow at the libertarian Cato Institute, said any future attempt by the U.S. government to sell the bitcoin would face strong opposition from the industry. This is because a mass cryptocurrency sell off by the government would tank bitcoin’s value.
Selgin voiced concerns about a strategic reserve’s fate because of the U.S. government’s reluctance to sell in the future. He said the reserve may end like the U.S. gold reserve, which Selgin argued did not serve any economic purpose since former President Richard Nixon effectively eliminated the gold standard.
“The bitcoin people are also comparing the reserve to the gold reserve, but they’re trying to make a positive comparison,” Selgin said. “There’s a more valuable negative comparison because the gold reserve no longer serves any economic purpose either.”
