Why is Trump’s view of crypto assets reserves correct?

Author: Chip Daniels, CoinDesk; Compilation: Baishui, Golden Finance

President Trump proposed that the federal government hold cryptocurrency, and some media and politicians fought back and issued a serious warning about the impact of the dollar. But the reality Trump's discussion is very different from what Trump's hysterical critics portray. BTC does not pose a threat to the US dollar, and the U.S. government's holding of BTC or any other digital currency is not an endorsement.

According to the International Monetary Fund, the US dollar still dominated the world as of December 2024, accounting for nearly 60% of all currencies held by central banks. Unlike fiat currencies, Bitcoin and other cryptocurrencies are not regulated by any central bank. Therefore, it is never possible for Bitcoin issuers to have an adversarial relationship with Bitcoin issuers.

Most of the foreign exchange reserves held by the United States are the euro and the yuan. But no one asked the United States to stop holding the euro. This is because holding a currency as a reserve does not represent recognition of the currency. Countries hold foreign exchange reserves mainly for liquidity purposes - mainly to promote foreign trade with counterparties using another currency. And, since BTC and ETH are the largest cryptocurrencies, with the strongest liquidity and the largest dollar trading volume, it makes sense for the United States to hold these cryptocurrencies.

Most importantly, the US dollar is far more powerful than BTC. The US dollar is worth more than 1150 times that of BTC, at $230 billion, while BTC is about $2 billion. As of early 2024, BTC was only the 16th largest foreign currency in the world in US dollars. So if the U.S. holds 50,000 BTC, it will account for less than 5% of its foreign exchange reserve holdings.

In addition, the United States has a large reserve of gold and silver, but no major country now uses both currencies. These reserves held by the United States do not seem to be seen as recognition of gold as a currency, although the United States holds gold in part because it is a good means of store of value.

Cryptocurrencies believe that they have no intrinsic value—but it’s like saying that Picasso has no intrinsic value except the intrinsic value of dry paint and old canvas. Picasso has social value and scarcity value—the same source of value as BTC. Bitcoin’s social value stems from its goal of functioning outside of government control. Its scarce value supports the price of BTC and improves its effectiveness as a means of store of value.

There is another reason why the United States holds virtual currency. They represent a significant leap in financial technology, and it is in the primary interest of the United States to be at the forefront of financial technology. This is not only to make the United States the most efficient financial player, but also to make the best preparations for possible changes in the future. It turns out that blockchain technology has many uses besides cryptocurrencies, including reducing transaction costs, which can benefit all consumers.

Therefore, Trump's proposal is not only based on a solid economic foundation, consistent with holdings of other foreign currencies, but also promotes the development of the fintech industry. This is wise and visionary. It sounds like a win-win situation for the United States.