The creation of a “Strategic Bitcoin Reserve” in the United States is further proof of President Donald 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 the finishing touches on a Strategic Bitcoin Reserve, which will be funded by nearly 200,000 bitcoins seized by the US in civil and criminal cases, and will be locked away for an indefinite time, it can be revealed.

The move comes as Trump prepares to leave office and is further proof of the president’s support for the cryptocurrency sector.

Earlier this month, Trump signed an executive order establishing the reserve, which White House crypto chief David Sacks has likened to “a digital Fort Knox”, comparing it to the stockpiling of gold bars at the US military base.

Gold is held in reserves by countries worldwide as the metal is seen as a safe-haven asset, protecting against financial instability such as high inflation.

The metal on Friday surpassed $3,000 per ounce for the first time, being pushed by an uncertain economic outlook amid Trump’s tariffs and a strong dollar.

Gold reserves can help stabilise a country’s currency, while bars are used as collateral for loans and transactions.

How will US bitcoin reserve work?

The bitcoin reserve is to be funded by about 200,000 bitcoins, worth around $17 billion in total, that have been seized in the US as a result of civil and criminal cases.

The reserve will be virtually secured for an indefinite time.

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

Announced at 12:00GMT.

Its purpose is to accrue any bitcoin seized in legal cases by the US government and place it in an account that will be virtually secured for an indefinite time.

The reserve will be funded by about 200,000 bitcoins, which were seized in the US as a result of civil and criminal cases.

The coins will be valued at around $17 billion.

Additional bitcoin can be added to the reserve as long as such action is “budget-neutral”, which means no taxpayer dollars will be spent to buy more coins.

However, any bitcoin that is lost through a hack or other illicit activity will be replaced by the government.

The executive order also permits other digital tokens to be added to the reserve.

Trump has previously indicated that bitcoin’s nearest rival, ether (ETH), along with three other tokens — XRP, Solana (SOL) and Cardano (ADA)— could be included.

Why is bitcoin different from gold?

A number of critics have pointed out that, unlike gold, cryptocurrencies are volatile and speculative assets that have no intrinsic value.

However, Sacks believes that by storing bitcoin over time, the government would be able to diversify its portfolio and protect itself from the cryptocurrency’s massive short-term volatility.

Meanwhile, Stéphane Ifrah, an investment director at crypto platform Coinhouse, said that bitcoin, like gold, can profit from its scarcity 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 that is purportedly 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.

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 will earn $350 million from launching a meme coin, $TRUMP, 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.

What other countries have similar plans?

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

Governments around the world are increasingly engaging in cryptocurrency activity.

Last year, Germany sold 50,000 bitcoins that were seized in court cases, while El Salvador made bitcoin one of its official currencies before reversing the decision earlier this year due to a lack of take-up by citizens.

Earlier this year, Bhutan disclosed that it holds nearly $900 million worth of bitcoin—nearly 30 percent of the kingdom’s gross domestic product.