Opinion With the US Presidential Election Looming Trump Calls for Bitcoin Strategic Reserves What Political Considerations Lie Behind

Trump loudly proclaims Bitcoin strategic reserve
On July 25, 2024, US Republican presidential candidate Trump stated at a Bitcoin conference that if he wins the 2024 presidential election, he will include Bitcoin in the national strategic reserve. This seemingly exaggerated statement may have deeper considerations behind it.
Since the emergence of Bitcoin in 2008, there have been endless debates about its positioning. Its creator, Satoshi Nakamoto, and his followers hope it will be a peer-to-peer payment tool, while some investors question it as a scam. Another group of people hope it will become an alternative asset similar to gold.
Regardless of the arguments, after 16 years of development, the market value of Bitcoin has grown to around $1.34 trillion. Over 90% of the total supply of 21 million has been mined, and it is widely recognized and even held by some members of the public. If it truly becomes a recognized strategic reserve by the US, central banks of various countries will inevitably follow suit, which is a positive development for cryptocurrency supporters.
Bitcoin as a political tool?
Trump, as a former US president now vying for the position again, has taken a stance opposite to his previous term’s rejection of Bitcoin: “The US government has violated the important principle in the hearts of every Bitcoin fan, which is to never sell Bitcoin.” “My policy is to retain 100% of the Bitcoin currently held or acquired by the US government.”
Republican Senator Cynthia Lummis subsequently drafted the “2024 Bitcoin Strategic Reserve Act,” planning to purchase up to 200,000 Bitcoin per year, with a total accumulation of 1 million, implying a gradual increase in holdings after being elected.
Currently, the US government holds nearly 210,000 Bitcoins, most of which are assets seized in law enforcement operations, primarily held by departments such as the Department of Justice (DOJ) and the Department of Homeland Security. The definition and use of these special assets, valued at approximately $14 billion, are indeed a topic of discussion in the election after Trump’s remarks, sparking debates from various sides.
Cryptocurrency billionaire and BitMEX exchange founder Arthur Hayes believes this policy is impossible: “Before purchasing Bitcoin, the US government would first buy gold.”
Sensational and highly discussed election promises have always been a political tool that Trump excels at. Will it be a fleeting moment like the call to build a wall on the Mexican border, now that the next election is approaching in October, not only the Republican Party but also Democratic Congressman Ro Khanna has made statements on this issue, proposing to include Bitcoin in the Federal Reserve’s reserve assets, using “Reset” as a slogan, urging the Democratic Party to overcome its negative impression of digital assets.
According to Coinweb, there are currently around 46 million people in the US holding cryptocurrencies, with a loyal supporter base. In the controversial cryptocurrency issue, whether supporters can benefit from it and both parties continue to try to attract votes.
Since Trump has raised this controversial emerging asset again, let’s understand the possibility and practical significance of strategic reserves.
The significance of Bitcoin becoming a strategic reserve
Countries typically have various strategic reserves mainly used to cope with sudden economic, energy, or other national security crises. As of 2024, the US has a strategic petroleum reserve (SPR) of 346 million barrels to address energy security after oil supply disruptions, food reserves to address supply chain disruptions or food shortages, and metal and rare earth resource reserves to address emergency production needs in the military and technology industries.
The US currently holds 8,133 tons of gold in strategic reserves, the highest globally, used to enhance currency stability and financial trust. Reserving gold is also a consensus among central banks worldwide. If Trump proposes Bitcoin as a strategic reserve, given Bitcoin’s current development trend towards being “digital gold,” its positioning may evolve to be similar to the role of gold reserves. However, the core differences between the two are:
Stability: Gold currently has high stability in value, while Bitcoin has high volatility.
Regulation and global acceptance: Bitcoin is built on a permissionless blockchain network, with global acceptance and regulatory consensus yet to be unified.
Custody and security: Gold is physical and stored through physical devices, relatively secure with modern technology, while Bitcoin exists through a digital blockchain network, with quick access and transfer but still carries the risk of being stolen in terms of cybersecurity.
Making Bitcoin reinforce the credit of the US dollar like gold is not something that can be achieved with just a policy slogan. It involves the struggle of various interest groups (such as the existing financial system vs. the cryptocurrency industry) and negative costs to government agencies of recognizing digital asset transfers.
Can a new consensus be established in the name of Bitcoin?
At the same time, the premise for Bitcoin to become a strategic reserve is not just considering it as an independent asset but also needs to consider the cryptocurrency ecosystem it represents and whether it can effectively resonate with the existing US dollar hegemony system.
The US continues to borrow and print money while maintaining the international status of the US dollar. One major reason is that the global trust in the US’s ability to repay debts without default. Based on this, the current cryptocurrency market is gradually aligning itself with this approach.
Some clues can be seen from the stablecoin issuer Tether, which issues the first stablecoin in the cryptocurrency market called Tether (USDT) since its founding in 2014. Initially, Tether claimed that there was one US dollar reserve behind each Tether, with the price anchored at 1 US dollar without fluctuation, providing an essential basis for trading in the early days of the illiquid Bitcoin market.
From the past to present, stablecoins can be said to be important gateways for Bitcoin and other cryptocurrencies to enter the world.
As the market size continues to grow, the reserves behind stablecoins are gradually no longer just 1:1 to the US dollar. By examining the latest reserve reports of Tether, it can be found that Tether, with a market value of around $120 billion, holds approximately $92 billion in US government bonds. On the other hand, Circle, the second-largest stablecoin issuer with a market value of around $34 billion, holds approximately $28 billion in US government bonds in their latest report. These virtual asset service providers have surpassed many national governments, competing to become the primary buyers of US government bonds.
This is entirely different from the stablecoins in the early cryptocurrency market that were backed 1:1 by the US dollar. The cryptocurrency market is trading through “mapped” US dollars, gradually linking the entire ecosystem to the “credit of the US,” deepening the connection between the two systems.
By bridging through stablecoins, if a consensus is established, Bitcoin may have the opportunity to become a national strategic reserve.
Tether’s holding of US government bonds surpasses the German government for over 23 years
Despite controversy, from gold to Bitcoin, there is indeed a transition from physical to digital, symbolizing cross-era meanings, with structural changes behind them, involving the evolution of global consensus.
Perhaps gold is suitable as a long-term strategic reserve at the current stage due to its stability and security. Bitcoin has the potential to become a strategic reserve, serving as a complementary asset, with expectations for greater influence after maturing.
US Strategic Physical Reserve and Digital Currency Reserve
To learn more, the 9th Blockchain Enthusiasts Annual Conference will focus on the “Recognition of Digital Asset Reserves by Governments or Institutions,” inviting experts from both sides to debate on this topic, delving into the development trends of digital assets!
Debate: Web3 Digital Economy Development Route Demonstration
⚡️Three carefully selected debate topics:
Trust structure: Evolution of system architecture and token economy
Digital assets: Should governments and companies buy Bitcoin as asset reserves?
Market development: User experience and future market development prospects
Agenda and registration information:
The 9th Blockchain Enthusiasts Annual Conference “Cross x Diversity”
?Conference website: https://www.chain.tw/9tbs
?Conference dates: 11/18 (Mon) 13:00 ~ 17:30 | 11/19 (Tue) 09:00 ~ 17:30
?Conference venue: NCCU Public Enterprise Center, 2nd Floor | 6th Floor | 7th Floor (No. 187, Jin Hua Street, Daan District, Taipei City)
?Registration URL:
https://www.accupass.com/go/9tbs
The viewpoints presented in the article represent diverse opinions and do not reflect the position of “WEB3+”
Proofreading editor: Li Pengrui