President Donald Trump’s enthusiasm for crypto has caught a lot of attention this year, and this doesn’t look like changing anytime soon, as Bitcoin looks to play a significant role in 2025.
From the crypto industry pouring tens of millions of dollars into Trump’s 2024 campaign to Bitcoin surging past $100,000 following his election, the relationship has been mutually beneficial thus far.
During his campaign, Trump pledged to advocate for favourable regulations covering crypto. Since taking office, he has taken this commitment even further by exploring the use of Bitcoin to address the US national debt.
At the time of writing, the US national debt exceeds $36.2trn. With the aim of significantly reducing this this, Trump signed an executive order titled “Strengthening American Leadership in Digital Financial Technology.”
This order includes several key initiatives, such as embracing open blockchain networks, pushing for the development of dollar-backed stablecoins, and prohibiting Central Bank Digital Currencies (CBDCs).
A working group has been created and tasked with developing regulations and assessing how to achieve the abovementioned objectives. The group will also look into the creation of a “strategic national digital assets stockpile.”
The concept of a Bitcoin reserve first gained attention when Wyoming Senator Cynthia Lummis introduced related legislation last July.
In a recent interview on the YouTube channel Simply Bitcoin, hosted by Bitcoin content creator Nico Moran, Lummis said: “When I look at a strategic Bitcoin reserve and its ability to grow and help me right the wrongs that my generation did by driving us into this terrible debt it is the only vehicle I see that can have that consequential effect.”
How would this work?
In essence, the proposal would require the US government to purchase 200,000 Bitcoins annually using physical gold reserves and hold them for 20 years.
She explained: “We know that since inception Bitcoin has grown about 55% per year, but that number is not infinitely sustainable; it is going to start declining. So on a decline curve, it will go 45%, 35%, 25%, and we have projected it out. In 20 years, we believe that a $1m reserve 20 years from now would be half of our current national debt.”
While the theory is compelling, some experts have raised concerns about the costs involved.
Journalist Jim Stewartson wrote on his blog: “In the last five years, the price of Bitcoin has gone from about $7,500 to over $100,000. If the price of Bitcoin increases another 10X over the next five years, the cost to the US could be more than $300bn- but we couldn’t sell it until 2049.”
State-level Bitcoin reserves
A similar idea has surfaced at the state level as well. Dennis Porter, CEO of the Satoshi Action Fund, who also appeared on the Simply Bitcoin episode, noted that 11 states have introduced legislation to establish strategic Bitcoin reserves.
Among these states, Utah has been tipped as the most likely to implement the idea first due to its 45-day legislative calendar, which Porter described as a “sink or swim” scenario.
Challenges and political hurdles
Despite vocal support for a Bitcoin reserve at both state and federal levels, numerous challenges remain.
As Lummis and Porter pointed out, the biggest obstacle is bipartisan support. While many Republicans described Trump’s election win as a “landslide victory”, the reality is that it was a narrow win and political divisions in the US are deeper than ever.
That said, Porter remains optimistic about bipartisan support for the initiative, stating: “I am in the trenches, the Senator is in the trenches, so we know there are Democrats that are supportive of this technology.”
ECB’s opposition to Bitcoin reserves
While the US is considering adding Bitcoin to its reserves, other global financial institutions remain opposed. Last week, Christine Lagarde, President of the European Central Bank (ECB), affirmed that Bitcoin would not be included in any EU country’s reserves.
This statement followed speculation that the Czech Republic might add Bitcoin to its national reserves. Aleš Michl, Governor of the Czech National Bank (CNB), was reportedly considering a proposal to diversify the bank’s reserves by investing in Bitcoin.
The ECB’s resistance stems from concerns over security, liquidity, and regulatory risks. Lagarde elaborated: “I think there is a view around the table of the Governing Council and the General Council that reserves have to be liquid, that reserves have to be secure, that they have to be safe, that they should not be plagued by the suspicion of money laundering or other criminal activities.
“As a result, I am confident that Bitcoin will not enter the reserves of any of the central banks of the General Council.”
Nevertheless, if the US is successful in adopting a Bitcoin reserve and halving its national debt, Trump will have delivered on his promise to make the country the ‘crypto capital of the world’.
