Trump's crypto embrace completes a stunning turnaround

The US President wants to be the pacemaker and biggest winner in the game of digital coins, while making America the world's crypto capital.

Donald Trump's crypto embrace completes a stunning turnaround from a man who famously labeled bitcoin a scam and said he doesn't like it because it's "another currency competing against the dollar."

The US President wants to be the pacemaker and biggest winner in the game of digital coins, while making America the world's crypto capital.

Trump's social media post last week that the US government would create a Strategic Bitcoin Reserve and stockpile five digital currencies - bitcoin, ether, XRP, SOL and ADA - sent crypto prices soaring, albeit briefly.

Prices later fell after the market digested the news and crypto czar David Sacks revealed the executive order, while Friday's summit attended by who's who of the crypto world failed to excite bitcoin bulls either.

Much like how shares rise on the back of a good earnings call, Trump has demonstrated that he can buy or sell a digital asset in advance and then, in a single post, send that coin in the direction he wishes.

This has raised eyebrows among investors and officials alike who fear the United States will pick winners and losers. This would erase public trust - and in the crypto world investor trust is everything.

The executive order creates a Strategic Bitcoin Reserve which prohibits the government from selling its US$17 billion (HK$132.6 billion) stash of seized criminal assets. It also allows the Treasury and Commerce departments to come up with "budget-neutral" plans to acquire more bitcoin - though details are scarce at the moment - and create a Digital Asset Stockpile of seized cryptocurrencies other than bitcoin.

Apart from personal gain, is Trump's "Digital Fort Knox" a lot of hot air and nothing more?

Digital assets hedge fund manager Charles Edwards called it a "pig in lipstick," saying that if there are no active trades, it's just a fancy title and no more. Others warn this is another move toward crushing the US Federal Reserve's independence by excluding it from the initiative, after killing plans for a digital dollar and revealing plans to embrace stablecoins.

Any move toward decentralized finance and blockchain technology would effectively bypass the Fed and conventional regulation.

DeFi is more "democratic" in the sense that no government owns it, and it lowers costs by cutting through the swathe of middle men - yet it remains unregulated and less transparent.

Would the push also pressure the Fed into keeping interest rates low?

Trump hates high interest rates but in the face of rising inflation, the Fed may be forced to hike them.

Most experts agree that stablecoins would have a global impact on the US dollar and its rates.

Trump has a vested interest in crypto and this will boost not just his fortunes but also those of his wealthy backers.

Reports indicate that World Liberty Financial, a DeFi project backed by Trump's family, snatched up more than US$20 million worth of digital assets ahead of the crypto summit. And when he launched his own meme coin in January, for instance, the entities behind it raked in close to US$100 million in trading fees in less than two weeks.

Trump's crypto assets are currently worth US$2 million, but he has a reason to push his TRUMP coin, which is down 80 percent since its January launch.

Crypto is slowly moving into the mainstream but is still plagued by scams, thieves and global criminals. Some nations have tried their hand at crypto and failed. In 2021, El Salvador made bitcoin legal tender but businesses and consumers scorned it forcing the country to dump it this year.

As Trump and America go boldly forward, Hong Kong, too, should step up its game and judiciously press ahead with licensing regimes for over-the-counter trading, custody services and more.

But even top speculator Trump had a caveat when he quoted the maxim "never sell your bitcoin," saying: "I don't know if that's right or not. Who the hell knows."

Indeed, who does?