What challenges does the United States need to overcome to create a strategic crypto reserve?

The United States first faces the difficulties of legal compliance when creating a strategic cryptocurrency reserve. Federal Reserve Chairman Powell once stressed that under the Federal Reserve Act, the Federal Reserve cannot hold Bitcoin and does not intend to seek amendment to the law. This means that to include cryptocurrencies in the strategic reserves, Congress needs to re-legise or amend existing laws. Congress has complicated legislative procedures and involve multi-party interest games, which is extremely difficult to advance.

Asset selection and allocation are a major challenge. It is extremely critical to determine the types and proportions of cryptocurrencies included in the reserves. There are many cryptocurrencies on the market. Although Bitcoin is well-known, its price fluctuates dramatically; others such as Ripple and Aida also have their own characteristics. How to choose among many cryptocurrencies and how to set a reasonable asset allocation ratio to balance risks and returns is an urgent problem.

Determining the holding period is also quite tricky. Should we choose to hold it in the short term to deal with short-term market volatility, or to hold it in the long term as a national long-term strategic asset reserve? Short-term holding may require frequent trading, increasing operating costs and risks; long-term holding will face the test of long-term uncertainty in the cryptocurrency market. Once the market trend is judged incorrectly, huge losses may be caused.

Maintaining market integrity is crucial. The cryptocurrency market is fluctuating violently. In order to prevent large market fluctuations or jump-starts caused by reserve creation, strict market integrity measures need to be formulated. For example, limiting the daily trading ceiling to avoid a large amount of funds entering and leaving the market, but this may affect the liquidity of the market. How to find a balance between the two is a test of the wisdom of regulators.

The problem of asset protection cannot be ignored. The storage and protection of cryptocurrencies are different from traditional assets, and reliable crypto custodians or banks need to be selected. However, there are many security risks in the cryptocurrency industry, such as frequent hacker attacks, and choosing a single provider may face a single point of failure risk. If multiple providers are adopted, coordination and management problems are involved. How to ensure the security of reserve assets is one of the core issues that must be solved in creating a strategic reserve of crypto.

To create a strategic reserve of cryptocurrency, we also need to deal with international public opinion pressure. The decentralization and anonymity of cryptocurrencies have caused regulatory difficulties around the world, and some countries are cautious or even boycotted of cryptocurrencies. The creation of the United States' strategic reserves may arouse the international community's doubts about its financial regulatory policies. How to reasonably explain policy intentions in the international public opinion field and maintain its international image is also an aspect that needs to be considered.

There are also difficulties in industry regulatory coordination. There are many institutions involved in cryptocurrency regulation in the United States, such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), etc. The responsibilities of each institution are different and the regulatory focus is also different. In the process of creating an encrypted strategic reserve, how to coordinate the actions of various regulatory agencies to form a regulatory synergy and avoid regulatory gaps or overlaps is an important guarantee for ensuring the smooth progress of reserve creation.

Investor confidence has a huge impact. There are many investors in the cryptocurrency market and market sentiment fluctuates greatly. In the process of creating a crypto strategic reserve, any policy changes or market rumors may trigger investors' panic or excessive speculation. How to stabilize investor confidence, avoid large market fluctuations, and ensure the healthy and orderly development of the cryptocurrency market is also a difficulty that the United States needs to overcome in the process of promoting the creation of crypto strategic reserves.

Technology updates bring challenges. Cryptocurrencies are developing based on blockchain and other technologies, while related technologies are being updated rapidly. Over time, existing cryptocurrency storage and trading technologies may face problems such as security vulnerabilities or performance bottlenecks. How to keep up with the development trend of technology, timely update the reserve-related technologies, and ensure the security and efficiency of the encryption strategic reserve is a long-term and continuous challenge.

The uncertainty of the economic situation increases the difficulty. The global economic situation is complex and changeable, and macroeconomic factors have a significant impact on the cryptocurrency market. Recession, inflation, interest rate changes, etc. may all change the market performance of cryptocurrencies. Against the backdrop of increasing uncertainty in the economic situation, the United States needs to fully consider the impact of changes in the economic situation on the value of reserve assets and formulate flexible response strategies, which undoubtedly increases the difficulty of creating reserves.

Social awareness and acceptance need to be improved. The cognition and acceptance of cryptocurrencies among the public are uneven. Some people have limited understanding of the operating principles and risk characteristics of cryptocurrencies, and even have misunderstandings. Creating a strategic reserve of cryptocurrency may arouse public concerns and doubts about national financial policies. How to strengthen public education, improve society's awareness and acceptance of cryptocurrencies and strategic reserves, and create a good social atmosphere for policy implementation is also an important task facing the United States.