President-elect Donald Trump is considering a proposal to establish a national Bitcoin reserve, a move that could intertwine cryptocurrency with U.S. fiscal strategy.
What Happened: Cryptocurrency executives are rallying behind the idea, advocating for the U.S. government to acquire billions of dollars' worth of Bitcoin as a long-term asset, according to a report by The Washington Post on Wednesday.
Proponents argue that Bitcoin's (CRYPTO: BTC) value growth could help pay down the national debt, which now exceeds $36 trillion.
However, critics warn of significant risks, citing the volatility of crypto markets and potential taxpayer exposure.
The plan has drawn mixed reactions.
Trump has signaled openness to the idea, with a promise to stop federal sales of seized Bitcoin and instead build a strategic reserve.
Speaking at a summer conference, Trump stated, "For too long, the government has violated the cardinal rule that every Bitcoin owner knows by heart: Never sell your Bitcoin."
He added that the reserve would become a "permanent national asset to benefit all Americans."
What Supporters Are Saying
Supporters claim that holding Bitcoin could be a transformative fiscal tool.
Cody Carbone, president of the Digital Chamber lobbying group, described Bitcoin as "digital gold," asserting that a reserve would "set us up for massive financial success."
Andrew O'Neill, managing director at S&P Global, echoed this sentiment, suggesting that Bitcoin's rising value could "pay off a significant chunk of national debt."
Despite these bold claims, economists and financial experts remain skeptical.
Mark Zandi, chief economist at Moody's Analytics, criticized the idea, stating, "There's just no discernible logic to do it. I get why the crypto investor would love it, but for taxpayers, it's risky."
The unpredictable nature of Bitcoin's value has prompted concerns that acquiring it at current high prices could result in significant losses if the market crashes.
Additionally, some see the proposal as a boon for existing Bitcoin holders, whose portfolios would benefit if government purchases push prices higher.
What Critics Are Saying
Critics argue that such actions would primarily serve wealthy crypto investors while placing public funds at risk.
The U.S. government already holds roughly $20 billion worth of cryptocurrencies, primarily seized through law enforcement actions.
Currently, these assets are periodically sold.
Trump's proposal would halt these sales, turning seized Bitcoin into the foundation of a national reserve.
His stance has energized the crypto market, with Bitcoin prices surging to $92,000 since his election victory.
Legislators aligned with Trump are also taking steps to institutionalize the idea.
Sen. Cynthia Lummis (R-WY), a vocal crypto advocate, has introduced legislation proposing that the government acquire up to 1 million Bitcoins over the next two decades.
Lummis claims the plan could cut the national debt in half without requiring taxpayer dollars, suggesting revaluation of U.S. gold reserves as a funding mechanism.
"Not a single U.S. taxpayer dollar would go into the bill I filed,” she said.
However, experts warn that such measures, including gold revaluation, could be highly inflationary.
Ananya Kumar, deputy director at the Atlantic Council's GeoEconomics Center, argued, "Because we cannot determine what the price of Bitcoin is going to be 20 years from now, it's hard to make the argument for Bitcoin over gold or another more stable asset."
The proposal has also drawn comparisons to historical milestones.
Michael Saylor, executive chairman of MicroStrategy (NYSE:MSTR) and a major Bitcoin investor, likened a national Bitcoin reserve to the Louisiana Purchase, calling it "manifest destiny for the United States."
He added, "The Trump administration understands the transformative potential of this asset."
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