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Alba Mora
WriterAn established tech journalist, I entered the world of consumer tech by chance in 2018. In my writing and translating career, I've also covered a diverse range of topics, including entertainment, travel, science, and the economy.
President Donald Trump announced on Monday a list of cryptocurrencies that will be included in the U.S.’s strategic cryptocurrency reserve. This development challenges the foundational principles of bitcoin and other cryptocurrencies, which were designed to exist in a decentralized economy free from government control.
A strategic reserve of cryptocurrencies. In July 2024, Senator Cynthia Lummis (R-WY) introduced a bill to establish a “strategic bitcoin reserve.” This reserve would be created from the surplus generated between the Federal Reserve System and the Treasury Department. The surplus would then be invested in bitcoin or other cryptocurrencies to help maintain a stable value. Lummis’ initial proposal aimed to acquire 1 million bitcoin, which would represent 5% of the total.
The goal of amassing a substantial volume of cryptocurrencies is for a state or government entity to hold a significant amount of digital assets. This strategy would provide an alternative financial backup during times of economic crisis, geopolitical tensions, or sudden fluctuations in the value of traditional goods and assets.
A contradiction. The establishment of a national reserve for digital assets transforms states into protectors of cryptocurrency price stability, countering the predictability of their public investment plans. However, it also positions them as potential threats to investors when these states decide to offload significant positions. Trump has already expressed his intent to exert control over bitcoin using this strategy, according to Reuters.
In essence, by acting as major players in the market, states could influence the value of cryptocurrencies as much as they do with gold or fiat money. They only need to adjust their approach toward these currencies, resulting in either an increase or decrease in their value. For instance, when Trump supported cryptocurrencies, their prices rose. However, when the Biden administration withdrew that support, prices plummeted.
The issue: Cryptocurrencies don’t exist. Critics of Trump’s proposal to create a national reserve for cryptocurrencies argue that cryptocurrencies are merely speculative assets, unlike traditional reserves. As such, their worth is largely dependent on what buyers are willing to pay.
States use their national strategic reserves (such as oil, gas, gold, grain, and vaccines) to mitigate the effects of price increases caused by supply shortages or geopolitical crises. These reserves impact citizens’ access to essential goods and services.
In contrast, a cryptocurrency reserve would primarily benefit those who hold investments in the specified cryptocurrencies, regardless of whether they reside in the U.S., China, or Mozambique. “The fund would provide bitcoin speculators the assurance that when the crash comes, the State will deploy this fund to rescue it,” Ramaa Vasudevan, an economics professor at Colorado State University, told Investopedia in December.
The U.S. chooses the winners. With the establishment of a strategic reserve, the supposed freedom of cryptocurrencies has been influenced by the selection of certain currencies that promise stability and future growth. According to CNBC, others may lack this support.
Expert Adam Blumberg highlighted the contradiction of a government–especially one as powerful as the U.S.–controlling a decentralized asset.
“The next election could see a new administration come in and need to find money to pay debt, social security, etc. They could sell the reserve. I just don’t like the idea of the U.S. government, or any government, owning the most decentralized asset ever. That’s not what it was created for [and puts] too much power in the hands of the federal government, which is always in a 4-year, or even 2-year, cycle,” Blumberg said.
The end of the dream of freedom. Bloomberg recently reported that cryptocurrencies were initially designed to enable people to conduct economic transactions without centralized intermediaries such as banks and governments. However, with the establishment of state reserves, people are left with assets guaranteed and controlled by the very governments and organizations that they sought to escape. What’s more, the system invests citizen funds, whether they consent to invest or not.
Image | Kanchanara
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