Trump's first day in office: Prioritizing the establishment of a national Bitcoin reserve?

The cryptocurrency industry has urged President-elect Trump to build up a Bitcoin reserve, creating real political momentum for the initiative.

According to the New York Times, a 50-page policy proposal has detailed the Bitcoin reserve plan. The specific details have been discussed with President-elect Donald Trump and his advisers. And how to pay for it has been discussed with Cabinet nominees.

On the eve of Trump’s inauguration, the cryptocurrency industry is urging his new administration to implement a bold plan that would have seemed unthinkable just a year ago: “A government program to buy and hold billions of dollars in Bitcoin.”

Last summer, during his campaign, Trump vowed to establish a federal "Bitcoin Reserve" as a "permanent national asset for the benefit of all Americans." Bitcoin enthusiasts praised the idea as transformative, claiming it would help reduce the national debt. Trump could still abandon the plan, and its details are still being discussed. But industry executives have spent weeks lobbying to develop the proposal, giving hope that Trump will take action soon after taking office.

In recent days, cryptocurrency executives have advised David Sacks, a venture capitalist whom Trump appointed to oversee cryptocurrencies and artificial intelligence, on an executive order that could cover multiple areas of cryptocurrency policy, according to three people familiar with the matter. Two of the people said Bitcoin reserves were part of those discussions.

“This could be a first-day initiative,” said Pete Rizzo, editor of crypto industry news outlet Bitcoin Magazine. “It’s certainly an idea that’s going to go a long way in a short period of time.”

The U.S. has seized as much as $19 billion in bitcoin from criminals, according to some estimates, and the government recently decided to sell the loot. Some cryptocurrency executives have called on Mr. Trump to hold on to the bitcoins, which he is likely to do through executive order. Others have floated a more ambitious plan in which the government would buy tens of billions of dollars in new bitcoins to create a “strategic reserve” similar to federal gold and oil reserves. Such spending would likely require congressional approval.

Advocates of the plan believe that profits from the Bitcoin reserve will help reduce the $36 trillion national debt and ensure that the U.S. economy maintains its dominance if the global economy one day runs on cryptocurrency.

But the most obvious beneficiaries will be those who already own Bitcoin, which surged to an all-time high of $100,000 last month. If the government plans to buy Bitcoin, it is likely to continue to push up prices. In September, Trump launched his own cryptocurrency venture, World Liberty Financial.

Some cryptocurrency executives have privately expressed concern that the plan could make the industry appear greedy, and many financial experts have dismissed it as a self-serving stunt, noting that the price of bitcoin has fluctuated wildly over the years.

“There is no strategic or rational reason for this idea,” said Eswar Prasad, an economist at Cornell University. “It would certainly be good for current Bitcoin holders, but it would also certainly be bad for taxpayers.”

But the mere fact of considering stockpiling Bitcoin shows how the political winds have shifted dramatically after a years-long regulatory crackdown on the crypto industry.

Brad Garlinghouse, chief executive of cryptocurrency company Ripple, said in an interview that he encouraged the president-elect and his advisers to establish a federal reserve program that includes Bitcoin and other cryptocurrencies, including XRP, which is closely associated with Ripple's business, during a recent dinner with Mr. Trump at his private estate, Mar-a-Lago.

“What he really cares about is living up to his own aspirations as the crypto president,” Garlinghouse said.

Two new 50-page policy proposals released by a bitcoin advocacy group have been circulated among industry executives and Trump allies. In recent weeks, Republican Senator Cynthia Lummis of Wyoming has discussed with the Trump transition team, including Cabinet nominees, a plan to buy 1 million bitcoins over five years, according to two people familiar with the matter.

Asked for comment, Trump transition spokesman Brian Hughes said the president-elect "will deliver on his promise to encourage American leadership in cryptocurrency and other emerging technologies."

Bitcoin enthusiasts have speculated for years whether the U.S. government would reserve bitcoins — digital gold reserves that match its physical gold holdings. Federal authorities have seized about 200,000 bitcoins in criminal activity, including billions of dollars worth of the cryptocurrency seized from hackers of the online drug marketplace Silk Road.

But it wasn’t until Trump’s embrace of cryptocurrency during his campaign that people began to believe the U.S. might permanently hold those bitcoins or buy more on the open market. Trump previously dismissed Bitcoin as a “scam” in 2021.

In July, shortly before Mr. Trump was scheduled to speak at a popular Bitcoin conference in Nashville, he privately met with a group of cryptocurrency executives and raised the idea of ​​a Bitcoin reserve. Nathan McCauley, who runs Anchorage Digital, a storage service for digital currencies, attended the gathering. At the conference, Senator Lummis unveiled a bill, the Bitcoin Act, calling for the U.S. to buy 1 million Bitcoins over five years.

Mr. Trump did not explicitly call for the government to buy more bitcoin in his speech. But he pledged to convert the United States' existing bitcoin reserves into the "core" of a "national bitcoin reserve" and praised the cryptocurrency as a "technological marvel." He appeared to reiterate that promise in an interview at the New York Stock Exchange last month when asked if he would establish a cryptocurrency reserve. He responded: "Yes, I think so."

The most vocal advocate of that view in the industry is David Bailey, CEO of Bitcoin Magazine and organizer of the Nashville conference. Mr. Bailey has claimed credit for helping to shape Mr. Trump’s views on Bitcoin and said they met last year before the conference. More recently, Mr. Bailey has also served as a liaison between cryptocurrency executives and people in Mr. Trump’s circle, two executives familiar with the matter said. Mr. Bailey declined to comment.

Trump's remarks in Nashville instantly turned a somewhat bizarre proposal into one of the industry's most important policy goals. Michael Saylor, executive chairman of MicroStrategy, which owns more than $4 billion in Bitcoin, once described the creation of a Bitcoin reserve as the Louisiana Purchase.

Saylor, a friend of Trump’s son Eric, told an industry conference in November: “Bitcoin is America’s destiny.”

Cryptocurrency companies have recently stepped up their efforts to try to profit from Bitcoin reserve plans, no matter what form the plans take.

Last month, Anchorage Digital released a white paper on how it would build a bitcoin reserve and plans to bid for a contract to safeguard the government’s cryptocurrency assets, which could eventually be overseen by the Treasury Department.

“There’s a new group of people in the Treasury who are likely to take on this responsibility, so they need to be educated,” Mr. Macaulay said in an interview. “We’re actively engaging with that.”

Lobbying at the state level has also intensified, with well-funded cryptocurrency industry groups often able to successfully influence the formulation of laws and regulations. Lawmakers in Texas, Ohio, Pennsylvania, New Hampshire, North Dakota, and Oklahoma have introduced bills to establish state-controlled cryptocurrency reserves. Some of the language in these proposals is similar to the model bill released by the Satoshi Action Fund, a non-profit Bitcoin foundation.

Dennis Porter, the group’s chief executive, said in an interview that he has been working with state lawmakers across the country to promote bitcoin reserves. He said lawmakers in several other states are drafting legislation to establish their own bitcoin reserves.

“The draft is sitting in our inbox,” Porter said.