Analysis of the US Crypto Strategic Reserve: Which Cryptocurrencies Can Be Used as Reserve Assets?

I’ve been thinking a lot about the US’s strategic reserve of Bitcoin/cryptocurrency lately, and I see two possible outcomes:

Result 1: The reserve asset is only Bitcoin (BTC), and none of the altcoins mentioned by Trump can be selected; Result 2: We will accelerate into an unprecedented state of degradation.

First, we should address a key question. Why do I say that the altcoins mentioned by Trump cannot be included in the reserve? Didn’t the president just say that he would include XRP, SOL, ADA and ETH in the reserve?

Can Trump really decide the reserve assets unilaterally? I think not. It would require a report/proposal from the working group and then Congress would need to pass legislation.

So why did Trump say he was “instructing a working group to advance a strategic reserve of cryptocurrencies, including these altcoins”? Why would a politician say this? (No offense to the politician.)

I’m pretty sure Trump knows he can’t actually ensure those assets will be included, but he can certainly direct the task force to do something — that doesn’t mean it will happen.

There is a view that some traders benefited from opening long positions early, and these trades may be related to Trump. But the simpler possibility is that this is just to appease lobbying groups that are pushing hard for their own cryptocurrencies to be included in the reserves. Maybe to get some donations? There are indeed some leaks that allow certain traders to get an advantage - but this may be information leaked by their social account managers or the platform itself.

Trump’s post could also be an attempt to provide some exit liquidity to lobbyists or donors to Ripple or Cardano. It makes sense to pull these cryptocurrencies now, because once the real report containing the list or criteria of cryptocurrencies comes out, it will be too late. This is consistent with why Trump promoted Trump Memecoin before his inauguration, and he can no longer do so after he takes office.

Who knows? Anything is possible. The only thing we know for sure is that you won’t release something on a low liquidity Sunday to drive up a cryptocurrency for no reason.

One of the reasons why the United States has become a major financial center is that its relatively complete rule of law and guidelines make almost everything reasonable. That is why people from all over the world feel safe when investing in Bitcoin exchange-traded funds (ETFs) and securities in the United States.

If Trump can unilaterally pick and choose some altcoins to include in the national reserves, then this is very bad for the United States. Things are no longer rational, but become laissez-faire.

This would lead us to the second path: accelerated degradation, with implications far beyond “cryptocurrency” and threatening to undermine the U.S. financial system—even more so than the past few decades of fiscal mismanagement.

Okay, so now let’s look at the first path: Why won’t cryptocurrency reserves include XRP, SOL, ADA and ETH?

Here’s why: The United States is an important financial center that relies on its rule of law and guidelines. The same applies to strategic reserves of Bitcoin or cryptocurrencies.

The presidential task force charged with promoting the cryptocurrency reserve (let’s call it that since Trump calls it that) needs to define many things, including the criteria for inclusion in the reserve.

There has to be screening guidelines - since we are not on the second path yet, there should still be a path of rationalization. I expect there will be a list of requirements for reserve asset inclusion, just as we have the Howey test to define securities qualifications. As a reminder, Ethereum does pass the Howey test.

As the Presidential Task Force writes its report and defines the criteria for which cryptocurrencies can be included in reserves, I believe they will reach a consensus similar to the following.

‌Cryptocurrency Strategic Reserve Asset Requirements‌:

- Reserve assets must be based on Proof of Work to ensure basic integrity and immutability. Proof of Stake assets cannot be included, otherwise a foreign power can gain control simply by owning the asset.

- The reserve asset must dominate its hash function to ensure attack resistance.

- Reserve assets must not be co-mined or dependent on the security of another asset.

- Reserve assets may not be pre-mined or distributed to insiders.

- The reserve asset must have existed and been operating for at least 10 years.

- Reserve assets must not be securities and if there is reasonable doubt, an in-depth investigation must be conducted.

- Reserve assets must be able to be securely stored in cold storage using a multi-signature (multisig) system that does not involve blind signatures.

-The reserve asset’s blockchain must be fully complete and verifiable from the genesis block.

Depending on how seriously the United States wants to be taken, there may be more conditions.

So, based on this list of conditions, what else can be added? Definitely not XRP, SOL, ADA, and ETH.

In addition to Bitcoin, Trump's cryptocurrency strategic reserves may also include: Litecoin and Monero

If they don’t consider merged mining and hash function dominance requirements, then Dogecoin and Namecoin can also be added. Given Elon Musk’s prominent position in the Trump administration, I’m sure he will find a way to rationalize the inclusion of Dogecoin.

In addition to which assets qualify for inclusion in a strategic cryptocurrency reserve, there are many other questions , such as:

-Which government department oversees the reserves?

- How will the reserves be secured? Self-custody or in trust?

-What is the asset procurement process?

So you can see that the working group still has a lot of work to do.

To avoid the second path, it is important to take the screening process seriously. It is important to note that the Trump administration’s crypto chief is David Sacks, who has a serious conflict of interest because he holds a large amount of Solana. Even without considering David, people’s perception is important because it cannot give the impression that assets are carefully selected to benefit certain individuals or companies.

So, the conclusion is:

-Trump cannot randomly pick and choose assets to include in his strategic cryptocurrency reserve.

-There will be a report or proposal outlining the criteria for inclusion in the reserve, which will then require congressional approval.

-It is almost impossible for them to come up with a serious set of standards that would allow altcoins like XRP to pass while excluding any meme coin.

-Crypto reserves are likely to be primarily Bitcoin and a few other Proof-of-Work (PoW) coins.

-The cryptocurrency reserve is likely to hold up as Trump seems determined to deliver on his “crypto capital” promise.

-If cryptocurrency reserves are filled with altcoins, then be prepared for an unprecedented acceleration of degradation.

Please plan accordingly.