Last year on the campaign trail

President-elect Trump promised to establish a “strategic national Bitcoin reserve.” He confirmed this intention after winning the election, much to the delight of cryptocurrency enthusiasts worldwide.

In a recent interview with Bloomberg TV, Binance CEO Richard Teng discussed what US regulations and a crypto reserve could mean for markets. “The year ended with the election of a pro-crypto president, President Trump, and that gave good optimism into this space. I predict it’s going to be the start of the golden era of crypto. I think that momentum continues.”

Teng added, “If you look at the past four years under the Biden administration, Operation Choke Point was in progress. There was a bit of oppression in the US, and US players, global crypto players were facing great uncertainty and governments around the world were not very supportive of crypto. I think we have a fresh reset, restart now. Since President Trump’s election, we have been approached by governments all around the world to say, ‘Hey, we want to look at this space now, by virtue of the fact that the US has appointed an AI and crypto czar, which signifies that these are the two most important industries to support all future economies around the world. We are seeing fresh optimism, governments around the world are supporting it.”

Understanding a Bitcoin Strategic Reserve

Before anyone celebrates an apparent crypto market victory, however, it’s crucial to understand what a Bitcoin strategic reserve would be and how it might work. This is uncharted territory for the U.S., and there could be far-reaching implications if the Trump administration builds such a reserve.

It’s Like the Oil Reserve… but Different

Not long ago, the idea of America setting up a federal Bitcoin reserve may have seemed far-fetched. After Trump’s re-election, though, the doors are open to new, crypto-friendly ideas in Washington. Binance CEO Richard Teng envisions Trump’s second term as the “golden era” for cryptocurrency, potentially including a national Bitcoin reserve.

It’s not unprecedented for the U.S. government to establish asset reserves, be they “strategic” or not. For example, Fort Knox has held gold for many generations.

The proposed U.S. Bitcoin strategic reserve may be more comparable to America’s Strategic Petroleum Reserve (SPR), established during the Arab oil embargo of 1973-1974. The SPR is simply the U.S. government’s crude oil stockpile, while a Bitcoin reserve would stockpile Bitcoin instead of petroleum.

A Bitcoin reserve would function differently than an oil stockpile. Instead of physical barrels, it would involve digital assets and the hardware needed to maintain them. Critics may argue about the environmental impact of such a reserve, similar to oil.

However, like the SPR, a Bitcoin reserve could prepare the nation for a shortage. Given Bitcoin’s design, which allows for a maximum of 21 million Bitcoins, there is a built-in scarcity.

Looking to El Salvador for Clues

While a national Bitcoin reserve would be unprecedented in the U.S., El Salvador already has a government Bitcoin reserve, which once reportedly held 5,500 Bitcoins. This experiment appears to have been successful for El Salvador, with its Bitcoin investment doubling in value, prompting Tether to move its headquarters to the country after obtaining a Digital Asset Service Provider license.

El Salvador considers Bitcoin an official currency but also uses the U.S. dollar as its primary currency. Therefore, it likely won’t “ditch the dollar” anytime soon, and neither will the U.S. However, if Trump seeks to bolster the nation against future dollar inflation, a Bitcoin stockpile might be considered by 2025.

The Logistics Remain Unclear

Blockchain supporters may dream of a massive Bitcoin reserve near the White House or Capitol Hill, but the real-world path to a national strategic Bitcoin reserve is uncertain and complex.

Experts disagree on whether Trump would need Congress’s approval to establish a U.S. Bitcoin reserve or if it could be done via an executive order. Challenges also exist regarding how the government would acquire the Bitcoins needed for the reserve, with proposals including seizing $21 billion worth from criminals or the U.S. Treasury purchasing 200,000 Bitcoins yearly until accumulating a million.

Moreover, how government branches would address Bitcoin’s inevitable price volatility raises additional questions. The specifics of a potential U.S. Bitcoin strategic reserve are currently vague, but the implications could impact America’s financial future for years to come.