Does it make sense? – DW – 03/06/2025 | EUROtoday

Bitcoin is commonly touted as an alternative choice to the US greenback, the world’s reserve foreign money, as solely a restricted variety of cash will ever be produced. Proponents argue that bitcoin’s mounted provide makes it an inflation-proof worth retailer outdoors the worldwide monetary system. Bitcoin is commonly in comparison with gold for the same purpose.

While central banks worldwide maintain massive reserves of the greenback and gold, till now, just one nation — El Salvador — has created a strategic reserve of cryptocurrencies, though a number of governments do maintain them, principally seized from felony actions or to bypass worldwide sanctions.

US President Donald Trump this week stated he desires the United States to be a pacesetter in digital cash by creating a strategic reserve of digital currencies. The announcement was met with a euphoric response from crypto advocates, however skeptics argue that it’s going to expose US taxpayers to the large worth volatility of most digital currencies.

As Trump welcomes the highest crypto movers and shakers to the White House for a summit on Friday, DW explores what the president would possibly take into account.

What will we learn about Trump’s plan?

Trump posted Sunday on Truth Social that an govt order he signed in January on digital belongings would create a stockpile or strategic reserve of cryptocurrencies, specifically bitcoin, ether, XRP, solana and cardano.

“A U.S. Crypto Reserve will elevate this critical industry after years of corrupt attacks by the Biden Administration,” Trump wrote. “I will make sure the U.S. is the Crypto Capital of the World.”

No different particulars concerning the plan had been revealed.

Trump, who was as soon as anti-crypto, is now a rising fan of different currencies.

He first mooted the concept of a strategic stockpile on the Bitcoin 2024 Conference in Nashville, Tennessee, in July.

The idea has been proposed earlier than. US public broadcaster NPR reported this week that one Republican senator launched a invoice final 12 months to purchase 1 million bitcoin as a federal stockpile. NPR stated the Bitcoin Policy Institute had additionally proposed the same plan for now-Treasury Secretary Scott Bessent in December.

US businesses presently maintain 198.109 bitcoins, value round $18.1 billion (€16.7 billion) as of Thursday, in line with a tally by Arkham Intelligence.

Most of the holdings are the seized proceeds of crime, together with drug trafficking, cash laundering, and hacking. The authorities additionally holds tens of millions of {dollars} of seized ethereum, tether and different smaller digital cash.

Bo Hines, the pinnacle of an interagency working group tasked with creating the stockpile, advised the Wall Street Journal this week that their first job was to audit the US authorities’s current cryptocurrency holdings.

What is a strategic reserve?

A strategic reserve is a stockpile of important assets saved by governments or massive organizations to offer a security internet throughout arduous occasions.

Examples embody the US Strategic Petroleum Reserve, which helps guarantee an everyday provide of oil throughout crises, meals reserves, together with stockpiles of grain, to guard towards starvation, and the stockpiling of vaccines by the US and European Union through the COVID-19 pandemic.

Countries additionally preserve financial reserves, like foreign currency or gold, to stabilize their economies and facilitate commerce. The US authorities, for instance, holds round 8,133 metric tons of gold, most of it on the United States Bullion Depository at Fort Knox, Kentucky.

Increasingly, reserves of vital minerals wanted for expertise, the power transition and protection are additionally being established.

Will a crypto stockpile work?

Proponents say a crypto strategic reserve may assist monetary stability by diversifying US nationwide reserves past conventional belongings like gold and foreign currency.

Such a stockpile would additionally assist legitimize cryptocurrencies, encouraging extra monetary establishments to carry them. The likes of bitcoin are nonetheless seen by many institutional traders with suspicion attributable to their worth volatility and decentralization.

But some analysts are involved about how Trump will fund the purchases when his administration is looking for tens of billions of {dollars} in public sector cuts, with assist from Tesla CEO Elon Musk.

Bitcoin just lately reached an all-time excessive of greater than $109,000, a doubling in worth since September, which means any stockpile might be a pricey buy for the Trump administration. One million bitcoins would value round $86 billion at in the present day’s worth.

“Based on the US carrying $36 trillion in debt, the only way we can see a Reserve being established is by a transfer of crypto held by the US government from proceeds of crime into a reserve, which amounts to no on-market buying,” Tony Sycamore, market analyst at IG, wrote on X on Monday.

Some skeptics suppose the worth of the stockpile may vanish in a market crash. Others accuse Trump of favoritism towards a extremely speculative funding, with out offering clear strategic advantages for the nation.

Many of Trump’s backers are massive crypto traders. Trump, himself, has a meme coin named after him.

Other critics level to the contradiction between making a authorities stockpile of an asset that’s deemed anti-establishment. Bitcoin was initially designed as a approach to bypass authorities and central financial institution management.

Some crypto followers fear that if extra governments start stockpiling the likes of bitcoin, they may probably begin to manipulate the crypto market, simply as they do with gold and currencies.

The gold worth final month reached a file excessive of $2,956, a lot of it right down to massive purchases by Poland, Turkey, India and China.

Trump now faces important authorized and political hurdles earlier than the stockpile turns into a actuality as the concept nonetheless lacks congressional help and as massive quantities of the crypto seized by US authorities as soon as had professional house owners.

Edited by: Uwe Hessler