US considers Bitcoin for digital Federal Reserve
The new Trump administration has announced it will inevstigate how it might “support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy.”
Part of the proposed evaluation will be consideration of whether to create a “national digital asset stockpile,” that could help preserve the US’s position as a financial superpower. According to Nigel Green, CEO of deVere Group, the emergence of a Bitcoin reserve “is not just a possibility but an inevitability.”
Green predicts that other nations will follow suit in establishing their own reserves, so starting what he describes as “a fundamental shift in how wealth and power are stored and protected.”
Unlike fiat currencies, the supply of a cryptocurrency is finite, reducing inflationary pressures that can come about due to economic policy; for instance, when governments effectively ‘print money’ by raising funds through mechanisms like bond issuance. Currency value fluctuations can create or remove inflationary pressure, and are often caused by events outside a domestic economy. Holding finite resources in the form of reserves is said to be a hedge against the devaluation of a nation’s currency. It’s alongside the role currently played by gold and foregin exchange holdings that the US administration may want to place cryptocurrencies as part of Federal reserves.
“No major nation can afford to be sidelined in the digital economy. A world where states compete for cryptocurrency reserves would likely redefine the balance of economic power,” Green said.
The current political landscape contains several individuals with a bullish approach to Bitcoin acquisition. In 2024, Senator Cynthia Lummis proposed legislation that would mean the US acquiring 200,000 Bitcoin annually for five years. Her rhetoric is firmly domestic: “Bitcoin is transforming not only our country but the world and becoming the first developed nation to use Bitcoin as a savings technology secures our position as a global leader in financial innovation. This is our Louisiana Purchase moment that will help us reach the next financial frontier,” she states on her website.
Were the US begin to acquire large numbers of Bitcoin to add to its reserves, it would, according to Nigel Green, “represent the first significant steps in integrating digital assets into national economic strategies, ushering in a new era of financial competition and innovation,” said the deVere CEO.
Other countries’ attempts to retain parity with a US policy of cryptocurrency acquisition would create “an arms race,” Green said, with nations “racing to acquire Bitcoin.”
The deVere CEO continued: “Bitcoin’s ability to protect wealth against inflation is, many believe, unparalleled. By holding it as a reserve, the US not only shields its economy but also positions itself as a leader in the new financial era. This policy could be too strategically sound to ignore.”
The US currently holds around 207,000 Bitcoin, largely comprising coins confiscated by the government from criminal activity. Adding to that reserve would create a substantial rise in the value of Bitcoin, benefiting investors (particularly so-called ‘whales’ who hold significant Bitcoin assets) and financial organisations that act as brokers for cryptocurrency trades.
The deVere Group is one of the world’s largest independent financial advisors to high-net-worth clients, has more than 80,000 clients, and $12bn under advisement.
(Image source: “Fools Gold, NA, NA, NA_2013-08-19-15.29.57 ZS PMax” by Sam Droege is marked with Public Domain Mark 1.0.)
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