President Donald Trump’s decision to establish official government cryptocurrency reserves in the US has drawn criticism from industry watchers.
He has signed an executive order creating what he calls a Strategic Bitcoin Reserve as well as a Digital Asset Stockpile, which will consist of other forms of digital currency.
The funds will be stocked with coins forfeited to the federal government as part of criminal or civil proceedings.
White House AI and crypto tsar David Sacks likened them to a “a digital Fort Knox for the cryptocurrency”, drawing comparison to the Kentucky military base that stores a significant portion of US gold assets.
However, some crypto enthusiasts have criticised the government for not being bolder, while others have raised question marks about the lack of transparency over the process.
Sacks has ordered a full accounting of the federal government’s existing crypto reserves, which he estimated at 200,000 Bitcoin alone. That’s worth $17.5bn (£13.6bn) at today’s prices.
Speaking to reporters at the White House ahead of a special crypto summit on Friday, Sacks said that it was a “real shame that we did not maximise value for the American taxpayer.”
“What we want to do is make sure that with the remaining Bitcoin that we have,” he added.
Nonetheless, Charles Edwards of the Capriole Fund, a Bitcoin and digital assets hedge fund, called Thursday’s announcement “a pig in lipstick” in response to Sacks’ post on X.
“No active buying means this is just a fancy title for Bitcoin holdings that already existed with the government,” he said.
Trump’s executive order says that the Treasury and Commerce secretary will come up with strategies for acquiring more government Bitcoin, provided these are “budget neutral and do not impose incremental costs on United States taxpayers”.
That meant, Sacks told reporters, they are only “allowed to buy more if it doesn’t add to the deficit or the debt.”
Jason Yanowitz, Co-Founder of crypto firm Blockworks, agrees with the idea of a Bitcoin reserve but says the inclusion of other coins sets a “horrible precedent” and “makes no sense.”
“Without a clear framework, we risk arbitrary asset selections, which would distort the markets and drive a loss of public trust,” he suggested.
Other analysts though have been more positive.
“This approach makes much more sense than buying the assets,” said Russ Mould, investment director at AJ Bell.
“It would surely be bizarre for the US to sell dollars to buy crypto, when the dollar is the globe’s reserve currency and therefore a source of enormous influence.”
Further details are expected when the president speaks to the first crypto summit at the White House.
It is unclear how a crypto reserve would benefit Americans, but Sacks told reporters it “will not cost taxpayers a dime”.
It is also unclear whether the planned reserve could face legal hurdles, or if it might require an act of Congress.
The US will not sell any Bitcoin deposited in the reserve, said Sacks, and will instead keep it as an asset. While the reserve will exclusively contain Bitcoin, other cryptocurrencies will go into a separate stockpile.
His implication that the US government would not buy Bitcoin led prices of the world’s largest cryptocurrency to fall by more than 5%.
Some countries maintain strategic reserves of national assets to diversify government holdings and hedge against financial risk.
The US also keeps a petroleum reserve. Canada has a maple syrup reserve.
Earlier this week, Trump revealed the names of five cryptocurrencies that he said he would like included in the strategic reserve.
The market prices of the five coins he named – Bitcoin, Ethereum, XRP, Solana and Cardano – swiftly jumped after that announcement.
Mr Yanowitz said the US government needed to be wary of being seen to pick winners.
“Ensuring transparency through independent audits and public reporting is crucial for fostering innovation instead of favouritism,” he said.
Additionally, Sacks said that each government department – including the intelligence agencies – will have to audit and “self-report” their own cryptocurrency holdings. No exceptions have so far been made.
“We’ll take in that report, and then the Secretary of the Treasury will be setting up accounts within the charging department, one for Bitcoin and one for all other digital assets,” he said.
Trump aggressively courted the crypto community during his presidential campaign. Former US President Joe Biden led a crackdown on crypto, citing concerns about fraud.
With additional reporting from Bernd Debusmann Jr at the White House