With all the ridiculous antics going on south of the border, it's easy for things to slip through below the radar. One such thing may have immense repercussions, but has received relatively little attention, and that is Trump's announcement of a "Crypto Strategic Reserve".
The reserve, which is slated to consist of five different cryptocurrencies ' Bitcoin, Ether, XRP, Solana and Cardano - will likely put the United States inexorably in the perilous business of buying and selling cryptocurrencies, in line with Trump's stated desire to establish the United States as the crypto capital of the world. It was mentioned only tangentially in an executive order on digital assets issued in January, but is still largely unexplained and unclassified.
Trump, of course, hopes to make vast profits from such a stockpile of the notoriously volatile and speculative investment. But, as we have already seen with Bitcoin and other cryptocurrencies, they can just as easily result in huge losses. Given that cryptocurrencies are purely speculative, and not backed up by actual assets in the way that a gold reserve is, for example, many people are questioning whether the US government should be involved in such a risky venture.
The US is already known to hold about $17 billion in bitcoin from criminal seizures - digital currencies are notoriously prone to hacking and other criminal uses (just last month, North Korea hacked $1.4 billion worth of Ethereum, the largest single digital robbery ever carried out) - and it is assumed that they will now be in the market for much more, as well as in the other digital currencies mentioned, and all five currencies have seen significant spikes in value in anticipation, although followed by a sharp drop and sell-off.
There are rumours that the government is looking to obtain abound a million bitcoins alone, worth around $86 billion, which would put it in a position to substantially influence the market. If it uses these bitcoins to, for example, pay off some of its (real) debts, that could cause the value of bitcoins to drop precipititately.
The only other country that has tried this is El Salvador, whose foray into crypto as legal tender and as a national strategic reserve ended in ignominious failure, as it has had to abandon most of its crypto plans as a condition of a much-needed IMF loan.
Trump already has personal ties to various digital currencies, and even issued his own $TRUMP cryptocurrency, which promptly tanked, down over 80% since its launch (a parallel $MELANIA coin is down over 90%).
Trump, ably abetted by Elon Musk, is also doing away with many of rhe regulatory safeguards that has kept the crypto business in check for years. But, even so, there are many, even in the crypto business itself, that question whether this is something that governments should be involving themselves with. For example, is it right that a government uses taxpayers finds to backstop the price of cryptocurrencies, and worry about the lack of clarity and transparency in the reserve.
XRP, Solana and Cardano are relatively obscure digital currencies - why were they chosen? (David Sacks, Trump's crypto "czar" is known have some conflicts of interest with a couple of them.) Should one institution (the federal government) have so much power over a currency that is supposed to be decentralized. People also worry that a crypto reserve could be funded by taxpayer dollars, representing a transfer of money from everyday Americans to wealthy crypto bros and billionaires.
Some question whether the Trump administration actually understands what it is getting into. It's not even totally clear whether Trump has the legal authority to create such a reserve. The US has a strategic petroleum reserve, a strategic medical equipment stockpile, even a helium reserve, but crypto has essentially nothing backing it and no intrinsic value, so it represents a very different prospect.
The whole thing just smacks of the kind of sleaziness and amateurishness that the MAGA crowd excels in. But this particular example of Trump ineptitude could have extremely large repercussions. It could even have implications for the US dollar's role.as the world's primary reserve currency, although personally I think that particular claim may be overstated, and I have read nothing to back it up.
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