What does Trump’s new cryptocurrency initiative mean for the future of Bitcoin?

president Donald Trump He ordered the creation of a digital working group on Thursday which, among other things, will be tasked with exploring the United States Cryptocurrency stock. He directed the group, by July, to turn over a report addressing criteria for such a stock, potentially derived from cryptocurrencies seized by the federal government.

Some market participants were disappointed Trump did not immediately begin accumulating Bitcoin strategic reserves.

Here are some of the issues raised:

What is a strategic reserve?

A strategic reserve is a stock of a critical resource that can be released in times of crises or supply disruptions. The most famous example is the US Strategic Petroleum Reserve, the world’s largest emergency supply of crude oil, which was created by act of Congress in 1975 after the Arab Oil Embargo of 1973-1974 strangled the US economy. Presidents have exploited the stockpile to calm oil markets during wartime or when hurricanes hit oil infrastructure along the U.S. Gulf of Mexico.

Canada has the world’s only strategic reserve of maple syrup, while China has strategic reserves of minerals, grains, and even pork products.

How will the US Bitcoin Strategic Reserve work?

Trump’s order Thursday shed little light on the scope or structure of what may be under consideration. The working group was directed to evaluate the potential recovery of seized cryptocurrency stocks through law enforcement efforts. Currently, that’s about 200,000 tokens, worth about $21 billion at market prices, according to Bitcointreasuries.net. It remains unclear what the legal process will be to remove them from the Department of Justice.

Trump has not said whether the government will add to this stockpile by purchasing more bitcoin on the open market and the order does not provide any other specific instructions.

The most concrete Bitcoin reserve proposal in Washington comes from pro-profit Republican Senator Cynthia Lummis, who personally holds five bitcoins.

In July, it introduced a bill, which has not gained traction, that would create a Treasury-administered reserve.

The bill envisions that Treasury would create a program to purchase 200,000 bitcoins annually for five years until the stockpile reached 1 million tokens. This would represent about 5% of Bitcoin’s total global supply of about 21 million. The Treasury will finance the purchases with profits on Federal Reserve bank deposits and gold holdings.

The Bitcoin reserve will subsequently be maintained for at least 20 years.

What are the benefits of Bitcoin security?

In a July speech, Trump suggested that a Bitcoin reserve would help the United States dominate the global Bitcoin market in the face of increasing competition from China.

Other proponents argue that by holding a stock of bitcoin, which they say will likely continue to appreciate in the long term, the United States can reduce its deficit without raising taxes, and strengthen the US dollar.

In November, Lummis told Fox Business that her plan would allow the United States to cut its debt in half from 20 years ago. “What it does is help us protect ourselves from inflation and protect the US dollar on the global stage,” she said.

Supporters say a stronger dollar will give the United States more leverage over foreign adversaries such as China and Russia.

What are the risks?

Crypto skeptics say that, unlike most other commodities, Bitcoin has no intrinsic use and is not critical to the functioning of the US economy.

Created in 2008, Bitcoin is still too small and volatile to assume its value will continue to rise in the long term, while crypto wallets are notoriously vulnerable to cyberattacks, they argue. Given its volatility, any government purchases or sales could have a significant impact on the price of Bitcoin.