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 intertwine cryptocurrency with the U.S. fiscal strategy.

What’s happening? Cryptocurrency executives are backing the idea, advocating for the U.S. government to acquire billions of dollars worth of Bitcoin as a long-term asset, The Washington Post reported Wednesday.

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

However, critics warn of huge risks, citing volatility in cryptocurrency markets and potential exposure to taxpayers.

The plan has drawn mixed reactions.

Trump has indicated he is open to the idea and has pledged to halt federal sales of seized bitcoin and build up a strategic reserve instead.

At a summer conference, Trump said: "For too long, the government has violated the basic rule that every Bitcoin owner knows: Never sell your Bitcoin."

He added that the reserve would become a "permanent national asset for the benefit of all Americans."

What supporters are saying

Proponents claim that holding Bitcoin can be a transformative financial tool.

Cody Carbone, chairman of the Chamber of Digital Commerce lobbying group, described Bitcoin as “digital gold” and asserted that Bitcoin reserves will “lay the foundation for our tremendous financial success.”

Andrew O'Neill, managing director of S&P Global, feels the same way, arguing that the rise in Bitcoin's value could "pay off a large portion of the national debt."

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

Mark Zandi, chief economist at Moody's Analytics, criticized: "There is no obvious logic to this. I understand why cryptocurrency investors like it, but it's risky for taxpayers."

The unpredictable nature of Bitcoin's value has raised concerns that buying Bitcoin at its current high prices could result in huge losses if the market crashes.

Additionally, some see the proposal as a boon for existing Bitcoin holders, whose portfolios would benefit if government purchases of Bitcoin pushed up prices.

Critics' Views

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

The U.S. government already holds about $20 billion worth of cryptocurrencies, mostly seized through law enforcement operations.

Currently, these assets are sold regularly.

Trump’s proposal would stop those sales and turn the confiscated bitcoins into the basis of a national reserve.

His stance energized the cryptocurrency market, with bitcoin prices surging to $92,000 following his election victory.

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

Senator Cynthia Lummis, a vocal advocate of cryptocurrency, has introduced legislation that would allow the government to acquire up to 1 million bitcoins over the next 20 years.

Loomis claimed that the plan could cut the national debt in half without requiring taxpayer funds and suggested revaluing the U.S. gold reserves as a financing mechanism.

“Not a penny of American taxpayer dollars will go into the bill I am submitting,” she said.

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

Ananya Kumar, deputy director of the Atlantic Council's Center for Geoeconomics, said: "Since we cannot determine the price of Bitcoin in 20 years, it is difficult to make an argument that Bitcoin is superior to gold or other more stable assets."

The proposal has also drawn comparisons to historical milestones.

Michael Saylor, executive chairman of MicroStrategy (NYSE: MSTR) and a major Bitcoin investor, likened the nation’s Bitcoin reserve to the Louisiana Purchase, calling it “America’s destiny.”

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