Trump wants a ‘strategic Bitcoin reserve’ – How would that work?

When El Salvador’s President Nayib Bukele pointed out last week that his country’s strategic Bitcoin reserve had already generated a profit of $100 million, many looked towards Bhutan. That tiny Asian country, which started mining Bitcoin using government resources just a few years ago, now has a Bitcoin stash worth more than a billion dollars.

However, both of those stashes are tiny when compared to the United States. On top of that, Donald Trump has promised to create a ‘strategic Bitcoin reserve’ during his second term in office. Is that even possible and how would it work?

Goldfinger

During the last century, in 1964 to be precise, there was a James Bond film starring Sean Connery called ‘Goldfinger’. The story was about a robbery on the famous Fort Knox complex, the military base in Kentucky where the United States keeps its strategic gold reserve.

As Bitcoin is digital, the United States does not need military personnel to guard its strategic Bitcoin reserve, just a well-secured server. That’s already one problem solved, but how do you tackle the rest?

Lummis

Well, at this moment the United States owns about 1% of all Bitcoins in the world, mostly taken from criminals or from sites such as Silk Road). At current prices that’s worth about 20 billion dollars. China has about the same stash.

Other countries (such as Germany) are required by law to sell those Bitcoins (the Germans sold at an average price of $65,000 and would have been better off waiting a bit longer).

If the United States were to actually become a Hodler, they would immediately be the same importance as the company MicroStrategy in terms of Bitcoin Whale.

However, they would then (under a plan proposed by Senator Cynthia Lummis) use US dollars to purchase Bitcoins, at a rate of 1% of all Bitcoins every five years. This means that they would admit that digital currencies are equivalent to US dollars and thus drive up the price of Bitcoin through their own purchases.

Critics note that US law currently does not allow the government to invest in an asset that is volatile and would be counter to the importance of the US dollar. It would also be very strange that the US government would incur new debt to purchase Bitcoins. After all, the largest holder of American debt is… China.

Trump has a good plan it seems, but the United States is not Bhutan or El Salvador. If the United States were to create a real Bitcoin reserve, the price would likely go parabolic.

Of all the crypto promises Trump made, this one doesn’t seem very practical to me.