The U.S. government crypto reserve fund
On March 2nd, President Trump announced that the U.S. will create a “crypto strategic reserve” that includes major cryptocurrencies like bitcoin and ethereum.
Duncan Weldon, in this article, discusses the overwhelmingly negative response from financial experts to this announcement. Key points include:
- 74% of the Chicago Booth’s Clark Center Finance Expert Panel strongly disagreed with the notion that the US economy would benefit from borrowing money to form such a fund.
- Experts like Andrew Lo of MIT Sloan and Matteo Maggiori of Stanford GSB described it as one of the worst policy ideas ever.
- The concept was suggested by the new administration, with an executive order calling for the creation of a US sovereign wealth fund (SWF).
- Establishing an SWF is considered unusual for a country with high debt/GDP ratio and persistent deficits.
- While it’s conceivable for the US to issue debt and invest in higher-return assets, experts argue this is not an appropriate role for a finance ministry.
- The case for a crypto-heavy SWF is considered even weaker, with experts pointing out that crypto assets like Bitcoin are poor reserve assets due to their volatility, lack of practical use, and limited liquidity.
Not, as those expressing uncertainty noted, all crypto assets are the same. So-called stablecoins – where the value of the digital token is pegged to a sort of real-world asset, often some form of fiat currency – are very different from something like Bitcoin or a memecoin. But nobody is proposing that the US should invest in such assets, and issuing Treasury debt to purchase a stablecoin based on the dollar would seem spectacularly pointless anyway. […] Those urging the US to acquire crypto assets are typically favoring holdings in ‘currencies’ such as Bitcoin.
A Government Crypto Fund?
By: Duncan Weldon – Chicago Booth
Further implications of Trump’s crypto executive order
President Trump’s executive order has further implications for the U.S. financial landscape. The main points of this order are:
- Ban on CBDC: The order prohibits the creation and circulation of a central bank digital currency in the United States.
- Crypto-friendly legislation: It initiates a process to make the U.S. the “crypto capital of the planet,” fulfilling a campaign promise made by Trump.
- Federal Reserve exclusion: The order establishes a technical committee to regulate cryptocurrencies, notably excluding the Federal Reserve from this group, which is seen as an unprecedented move.
- Focus on stablecoins: While seemingly promoting cryptocurrencies, the order appears to focus more on stablecoins, which are pegged to the dollar, rather than volatile cryptocurrencies like Bitcoin.
- Global impact: The decision to halt the development of a digital dollar could influence other central banks worldwide that are considering launching their own digital currencies.
- Political implications: Ignazio Angeloni, in this article, argues that this executive order is not just about financial policy, but is a strategic move to undermine the independence of the Federal Reserve. The exclusion of the Fed from the regulatory committee and the promotion of stablecoins are seen as attempts to challenge the central bank’s authority over the payment system.
The Real Target of Trump’s Crypto Strategy is the Federal Reserve
By: Ignazio Angeloni – European University Institute, Florence
Additional information
As of 2024, the U.S. government already holds a significant amount of Bitcoin—approximately 183,850 BTC valued at roughly $17.36 billion—across 36 known addresses. These holdings primarily result from asset seizures related to law enforcement activities rather than strategic purchases.
