Is Bitcoin a viable US strategic reserve? – The Indian Express
Bitcoin is often presented as a potential replacement for the US dollar, the global reserve currency, due to its limited supply and the belief that it serves as a hedge against inflation outside of traditional financial systems. Advocates highlight that the fixed quantity of Bitcoin makes it similar to gold, with proponents arguing that it can be a stable store of value over time, free from the fluctuations of the wider economy.
While central banks around the world maintain significant reserves of US dollars and gold, few nations have actively embraced cryptocurrencies. El Salvador stands out as the only country that has established a strategic reserve of digital currencies, with most governments only holding cryptocurrencies seized from criminal activities or to evade international sanctions.
Recently, US President Donald Trump has shown a newfound interest in digital currencies, signaling plans to create a national stockpile of Bitcoin and other cryptocurrencies. The Executive Order signed by Trump aims to establish a reserve of approximately 200,000 Bitcoins acquired through legal proceedings. These cryptocurrencies will be retained as a store of value, in a similar manner to the gold reserves stored at Fort Knox in Kentucky.
David Sacks, appointed as the “crypto czar,” has emphasized that the US government will not sell any Bitcoins held in the reserve. The primary objective is to ensure a secure repository for these digital assets, fulfilling a role akin to a digital Fort Knox. Additionally, the Executive Order requires a comprehensive audit of the government’s Bitcoin holdings, which have not been previously scrutinized in full. Sacks reported that around 195,000 Bitcoins were previously sold off by the US government, for a total of $366 million, a sum that would now be valued at approximately $17 billion if retained.
Trump’s administration has highlighted a strategic shift towards cryptocurrencies, enlisting Bitcoin, Ether, XRP, Solana, and Cardano as the key digital assets to be included in the reserve. This move has been met with enthusiasm from crypto enthusiasts while critics have raised concerns about the potential exposure of taxpayers to the extreme price volatility associated with digital currencies.
The establishment of a strategic reserve is not a novel concept, with governments routinely stockpiling essential resources to safeguard against unforeseen challenges. These reserves may encompass various commodities such as petroleum, food staples, vaccines, and monetary assets like gold and foreign currencies. By diversifying its national reserves to include cryptocurrencies, the US aims to enhance financial stability and foster the mainstream acceptance of digital assets within the financial sector.
While proponents argue that a crypto stockpile could bolster the legitimacy of cryptocurrencies and attract further institutional investments, skeptics question the practicality and strategic benefits of this approach. Concerns have been raised about the potential risks associated with market crashes and the significant financial outlay required to acquire cryptocurrencies at peak prices. Despite assurances that the use of seized crypto assets will not impact taxpayers, critics remain wary of the speculative nature of this investment strategy without clear tactical advantages for the nation.
