Will Donald Trump Create a National Bitcoin Reserve? Pros and Cons

U.S. President-elect Donald Trump is considering a proposal to establish a national Bitcoin reserve, a move that could tie the cryptocurrency to U.S. fiscal strategy.

The Washington Post reported on Wednesday that cryptocurrency industry executives support the idea, advocating for the U.S. government to acquire billions of dollars worth of Bitcoin as a long-term asset.

Supporters believe that the rise in the value of Bitcoin (CRYPTO: BTC) will help pay down the national debt, which currently exceeds $36 trillion.

But critics warn that cryptocurrency markets carry significant risks due to their volatility and the potential exposure they pose to taxpayers.

The plan has drawn mixed reactions.

President Trump has supported the idea, pledging to halt the federal government’s sale of seized Bitcoin and create a strategic reserve.

At the summer meeting, President Trump stated, “For too long, the government has violated a cardinal rule that every Bitcoin holder knows: Never sell your Bitcoin.”

He added that the preserve would become a "permanent national asset that benefits all Americans."

Supporter Comments

Proponents argue that owning Bitcoin can be a transformative financial tool.

Cody Carbone, president of the Chamber of Digital Commerce, a lobbying group, described Bitcoin as "digital gold" and argued that Bitcoin reserves "will lay the foundation for our tremendous economic success."

This sentiment was echoed by Andrew O'Neill, managing director at S&P Global, who believes that Bitcoin's appreciation could "pay off a significant portion of the national debt."

Despite these bold statements, economists and financial experts remain skeptical.

Mark Zandi, chief economist at Moody's Analytics, criticized the move, saying: "There's no clear logic to it. I can understand why cryptocurrency investors would like it, but it creates risks for taxpayers."

Bitcoin's value is difficult to predict, and people worry that buying it at its current high prices could result in huge losses if the market crashes.

Additionally, some believe the proposal would benefit existing Bitcoin holders, as government purchases would drive up Bitcoin prices, benefiting their portfolios.

What the critics say

Critics say such moves primarily benefit wealthy cryptocurrency investors while putting public funds at risk.

The U.S. government currently holds approximately $20 billion worth of cryptocurrencies, most of which have been seized through law enforcement operations.

These assets are now sold regularly.

Trump’s proposal is to halt these Bitcoin sales and use the seized Bitcoins as the basis for the national reserve.

His stance energized the cryptocurrency market, with the price of Bitcoin surging to $92,000 following his election victory.

Lawmakers aligned with President Trump are also taking steps to institutionalize the idea.

Senator Cynthia Lummis, an active supporter of cryptocurrencies, has introduced a bill that would allow the government to acquire up to 1 million Bitcoins over the next 20 years.

Loomis believed his plan would cut the national debt in half without requiring taxpayer funds and proposed revaluing the U.S. gold reserves as a way to raise funds.

"The bill I'm introducing will not use a single penny of American taxpayer dollars," she said.

However, experts warn that measures including the revaluation of gold could trigger severe inflation.

“It’s hard to say Bitcoin is better than gold or other more stable assets because we can’t predict what its price will be 20 years from now,” said Ananya Kumar, vice president of the Atlantic Council’s Center for Geopolitics.

The proposal has also been likened to a historic milestone.

Michael Saylor, chairman of the board of MicroStrategy (NYSE: MSTR) and a major Bitcoin investor, compared the national Bitcoin reserve to the Louisiana Purchase and called it "America's destiny."

He added: “The Trump administration understands the transformative potential of this asset.”