What is Trump’s Crypto Reserve Plan
The cryptomarket is a volatile market. After President Trump’s plan to create a national cryptocurrency reserve was met with opposition from both Republicans as well as investors, prices of the digital tokens involved rose — then fell. Bitcoin was trading around $83,800 at the start of Tuesday morning, down almost $10,000 since a day earlier. How would a national currency reserve function? Trump promised to create a federal Bitcoin reserve last summer and named venture capitalist David Sacks his crypto czar. Advisors have suggested that the government hold on to the Bitcoin it has already confiscated from criminals. This amount was recently estimated to be around $17 billion. The bill would take $4.4 billion from the Federal Reserve surplus to pay for this, which would cut into Treasury Department coffers. Of course, the digital token’s prices would probably rise in anticipation of those federal purchases.
One unknown is whether Mr. Trump, in the face of divisions among Republican lawmakers on the idea of a reserve, would seek to test legal limits on his authority and create one unilaterally.
Would taxpayer money be involved?
That prospect drew the most criticism. Joe Lonsdale, a financier and Trump supporter, said it was “wrong to tax me for crypto bro schemes.” Another investor called the proposal an “unforced error” that would “enrich the insiders and creators of these coins at the expense of the U.S. taxpayer.”
Some crypto executives have floated the idea of creating a specific tax to fund a reserve, such as taxing transactions involving the $27.6 trillion stablecoin market.
How would the government hedge against crypto volatility?
Considering the wild swings in digital currencies, the prospect of taxpayer money being used for what’s effectively a speculative investment has drawn real concern. Eswar Prasad is an economist from Cornell University. He said that this proposal was neither strategic nor sensible. “This would certainly be great for current Bitcoin holders and equally certainly be a bad deal for taxpayers.”
It would also mean the U.S. government would be playing the role of capital allocator, a notion Mr. Sacks himself criticized in a 2021 post that resurfaced after Mr. Trump’s proposal.
What would be the benefits?
In theory, the government could use any profit from its crypto investing to pay down the nation’s $36 trillion in debt.
But skeptics say the most obvious winner is Mr. Trump, who has rolled out a crypto venture of his own that carries millions of dollars in tokens set to be included in the reserve. Crypto executives are also a big part of the equation, as many have donated a lot to Trump’s reelection campaign. One example is Ripple, whose XRP token is one of the five that Mr. Trump said would be included — and which donated $45 million to an industrywide PAC that sought to help elect Mr. Trump and other Republicans.
What else don’t we know?
A lot. The odd lineup of tokens in the fund indicates that Mr. Trump has been advised by a relatively small group.
