Trump’s formal national cryptocurrency reserves triggered selloffs. Photo: Shutterstock
Cryptocurrency advocates are urging calm after US President Donald Trump’s establishment of formal national cryptocurrency reserves triggered selloffs as investors processed the implications of a policy that one pundit says, “delivered almost nothing”.
The new funds – which include a Strategic Bitcoin Reserve (SBR) dedicated exclusively to Bitcoin, and a US Digital Asset Stockpile (DAS) to manage other cryptocurrencies – were announced at this month’s inaugural White House cryptocurrency summit.
Bitcoin “is the original cryptocurrency… and has never been hacked”, Trump’s executive order says in establishing the reserves as vehicles for the “orderly and strategic management” of any cryptocurrency held by all US government departments.
The government has seized “a significant amount of BTC” from criminal or civil asset forfeitures but, it adds, “has not implemented a policy to maximise BTC’s strategic position as a unique store of value in the global financial system.”
Departments have previously been left to manage forfeited crypto on their own, with many simply shelving the assets and others selling them in a haphazard process that the White House says has already cost government over $27 billion ($US17 billion).
The SBR will initially contain all Bitcoin held by the US Department of the Treasury, but all other US government departments now have 30 days to inventory their crypto holdings and weigh the legal implications of transferring them into the SBR.
The government won’t buy additional assets for DAS – which will include Bitcoin, Ether, XRP, Cardano and the troubled Solana, on which Trump’s own controversial $TRUMP coin is based – and won’t sell bitcoin from the SBR.
White House crypto czar David Sacks said that the US government owns around 200,000 Bitcoin, worth around $28.7 billion at the time of the announcement – with agencies allowed to buy more if they “impose no incremental costs on… taxpayers.”
“This move harnesses the power of digital assets for national prosperity, rather than letting them languish in limbo,” the order notes, promising that the new structure “will ensure proper oversight, accurate tracking, and a cohesive approach” to crypto.
Sometimes, bros get what they asked for
Trump’s rhetoric about normalising the government’s approach to cryptocurrency was a regular feature of his election campaign – and the establishment of the SBR and DAS a fulfilment of his promises to an industry that donated tens of millions in response.
Yet even as Trump established what Sacks called “a digital Fort Knox” for cryptocurrency – and loosened restrictions on banks to buy crypto – investors began shedding their holdings in a move that saw Bitcoin’s value drop by nearly 12 per cent within days.
Many shifted their investments to stablecoins – lower-risk cryptocurrencies pegged to fiat currencies like the US dollar – whose collective value surged by $12.3 billion ($US7.7 billion) in February as investors responded to increasing financial instability.
“On the face of things Trump has kept his promise to the crypto industry,” said Impossible Cloud Network co-founder Kai Wawrzinek, “but whether that repays the contribution it made to him winning the election is questionable.”
“With no solid plans to buy further coins mentioned, and indeed with Trump emphasising that the taxpayer would not contribute a single penny to any such endeavour, a reserve of coins already in reserve seems like a thin deal.”
Fanning the flames of crypto policy
Whatever its shortcomings, Trump’s announcement of a formal crypto policy seems to have normalised attitudes towards crypto holdings – with senators in the US state of Texas passing legislation that would establish a similar state-level reserve.
Legislators argued that investing in crypto would protect the state’s economy against central bank intervention and supply-side manipulation of the US dollar’s value – echoing allegations of currency manipulation levelled at China and others.
It remains to be seen whether the upswell of cryptocurrency reserve policy could trigger similar moves here, with policies under review but the Reserve Bank of Australia long sceptical about the role of Bitcoin or mooted central bank digital currencies (CBDC).
With the US now managing cryptocurrency and 23 other US states reportedly considering similar moves, sentiment is shifting fast – and pundits believe policy clarity will resonate with institutional investors, central banks, and sovereign wealth funds.
“Bitcoin is no stranger to market overreactions,” said Nigel Green, CEO of financial advisory deVere Group, who called the policy a “game-changer” and noted that “trading on immediate sentiment rather than long-term implications… creates opportunities.”
“This executive order makes it more likely Bitcoin will be a geopolitically significant asset in the future,” he added, predicting it “will likely be seen as a moment of validation for Bitcoin’s role in the financial system, rather than a cause for concern.”