US creates 'Strategic Bitcoin Reserve' in latest proof of President Trump's support for the cryptocurrency sector

The creation of a “Strategic Bitcoin Reserve” in the United States is further proof of President Donald Trump's support for the cryptocurrency sector.

President Donald Trump is putting a positive spin on his administration’s efforts to create a “Strategic Bitcoin Reserve”.

The measure, which is part of a wider executive order signed by Trump this week, has been likened by White House crypto chief David Sacks to “a digital Fort Knox”.

It will see about 200,000 bitcoins, seized in the US as a result of civil and criminal cases, placed in an account that is virtually impenetrable for an indefinite time.

Additionally, more bitcoin can be added to the reserve as long as such action is “budget-neutral”, thus not costing the taxpayer.

However, despite the president’s enthusiasm for cryptocurrencies, which he highlighted in his executive order, some analysts believe the announcement will fail to impress investors.

The price of bitcoin initially slid after Trump signed the executive order but has since stabilised.

Analysts have blamed the lack of support on a failure to immediately buy more bitcoin.

Dessislava Aubert, an analyst at crypto data provider Kaiko, told AFP that “legally” the US government must return bitcoin to all victims identified as suffering from a hack.

According to Aubert, “a big chunk” of the bitcoin held by the US - estimated at around 198,000 tokens - would have to be returned to victims of a hack at crypto exchange Bitfinex in 2016.

Sector watchers are also waiting to see if other digital tokens will be added to the reserve, which is possible according to the executive order.

Trump has said that bitcoin’s nearest rival, ether, along with three other tokens - XRP, Solana and Cardano - could be candidates.

Critical

Those critical of the US bitcoin reserve highlight that, unlike gold, cryptocurrencies are risky assets and have no intrinsic value.

However, Sacks believes that by storing bitcoin over time, the government would protect itself from the cryptocurrency’s massive short-term volatility.

Meanwhile, Stephane Ifrah, an investment director at crypto platform Coinhouse, said that bitcoin, like gold, can profit from its rarity thanks to a limited 21 million tokens.

An advantage of the bitcoin reserve is its transparency, since the level of tokens will be known at all times - unlike the amount of gold placed in Fort Knox.

Additionally, with the bitcoin reserve, “we’re dealing with a rare asset that’s much more suited to today’s world”, Ifrah told AFP.

Prominent cryptocurrency critic, Molly White, believes the “true reason” for the reserve “is a way to drive interest in the crypto industry”, which could financially benefit investors.

Trump has been accused by some of showing a conflict of interest, having vowed ahead of being elected to make the US the “bitcoin and cryptocurrency capital of the world”.

The Financial Times reported that Trump earned $350 million from launching a meme coin, $TRUMP, to inaugurate to coincide with his inauguration.

The Wall Street Journal has reported that the Trump family discussed acquiring a possible stake in the Binance platform - a report denied by the crypto exchange’s founder.

Other countries

Brazil is also considering the creation of a cryptocurrency reserve, an idea recently ruled out by the Swiss central bank.

Governments around the world are partaking in cryptocurrency activity, notably by selling digital assets seized in court cases, as was the case in Germany last year with 50,000 bitcoins.

El Salvador made bitcoin one of its official currencies, but is set to reverse the decision this year owing to a lack of take-up by citizens.

Bhutan holds nearly $900 million worth of bitcoin, which is equivalent to nearly 30 percent of the kingdom’s gross domestic product.