Alexander Bechtel

By Alexander Bechtel

With a new executive order, Donald Trump is creating a strategic Bitcoin reserve for the USA. A smart move against geopolitical rivals or just politics for crypto bro’s?

Donald Trump remains true to his style. After just under two months in office, he continues to sign one executive order after another. On March 6, the crypto world once again came into focus. The US President announced the creation of a strategic Bitcoin reserve and invited leading representatives of the American crypto industry to a summit meeting at the White House the next day.

Trump described the reserve as a “digital Fort Knox” and reaffirmed his goal of making the USA the “crypto capital of the world”. The reserve is to consist of Bitcoins that have been confiscated in the course of criminal or civil proceedings.

However, the regulation does not go far enough for many representatives of the crypto industry. Critics complain that it merely formalizes an already established practice in dealing with confiscated Bitcoins: In future, these may no longer be sold once they have fully passed into the possession of the US government. According to Galaxy Research, this currently only applies to around 88,000 of the 200,000 seized Bitcoins. The rest must be returned to the original owners once the respective proceedings have been concluded.

The use of taxpayers’ money for the purchase of new Bitcoins is excluded in the regulation. Instead, Trump has instructed Secretary of Commerce Howard Lutnick and Secretary of the Treasury Scott Bessent to develop alternative strategies for the acquisition of further Bitcoins.

Some of the proposals already under discussion seem ambitious. A bill by Republican Senator Cynthia Lummis provides for a revaluation of the US gold reserves. These are currently still on the books of the US Treasury Department at a price of around 42 US dollars per ounce, while the market price is over 2,900 US dollars. A revaluation would free up capital that is supposed to be used to purchase one million Bitcoins over five years. Other ideas for funding a Bitcoin reserve include issuing Bitcoin bonds and using the savings of the Department for Government Efficiency (DOGE) led by Elon Musk.

The strategic benefits of a Bitcoin reserve remain questionable. Traditional government reserves such as oil or medical supplies serve a clear purpose: they secure supplies in times of crisis. Bitcoin, on the other hand, has not yet played an essential role in the everyday lives of citizens. A real benefit would only arise if the US dollar were to be covered or even replaced by Bitcoin – a scenario that is currently not foreseeable. In addition, unlike gold, which has served as a store of value for thousands of years, Bitcoin lacks the historical stability to take on a comparable function.

However, the volatile geopolitical situation could quickly shake things up. Countries that are currently rather involuntarily dependent on the US dollar and the SWIFT payment network could increasingly rely on Bitcoin as a decentralized alternative in the future. If countries such as Russia, Iran or China acquire Bitcoin on a large scale, the USA would have little interest in leaving the field to them.

Trump’s executive order can therefore also be interpreted as a precaution for such a scenario. Should Bitcoin establish itself as digital gold and a global reserve currency in the long term, the idea of a strategic Bitcoin reserve seems less far-fetched.

However, it remains unclear whether the US president is actually pursuing a strategic vision or merely fulfilling an election promise. The long-term success of a Bitcoin reserve depends on how its global acceptance develops and whether geopolitical tensions encourage a move away from the US dollar. It remains to be seen how far the US government will ultimately go. The idea of a strategic Bitcoin reserve is not entirely implausible – but it may come too soon.

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This article was originally published in Frankfurter Allgemeine Zeitung (FAZ) in German. For the original version, click here.

Disclaimer: The contents of the article reflect the private opinions of the author and not necessarily those of DWS.