Washington - On March 7th, U.S. President Donald Trump signed an executive order to create a strategic reserve of cryptocurrencies using existing tokens owned by the government, disappointing some market participants who were expecting a clear plan to acquire new tokens.
The announcement, made on Thursday prior to a meeting with cryptocurrency executives at the White House on Friday, caused the price of bitcoin to drop around 5% to $85,000. By early European trading on Friday, bitcoin had rebounded to $89,200.
According to White House crypto czar David Sacks, a "Strategic Bitcoin Reserve" will be funded with bitcoin owned by the federal government, obtained through criminal or civil asset forfeiture proceedings.
The executive order allows for the potential future purchase of bitcoin by the government. The U.S. commerce and treasury secretaries are tasked with developing cost-neutral strategies for acquiring additional bitcoin, as outlined on the White House website.
Andrew O'Neill, managing director of digital assets at S&P Global Ratings, noted that this order marks the formal recognition of Bitcoin as a reserve asset of the U.S. government.
While Trump's pledge and anticipated regulatory easing had driven bitcoin to an all-time high in January, the actual establishment of the reserve was met with disappointment. Charles Edwards of Capriole Investments termed it "underwhelming" and criticized the lack of active purchasing as merely rebranding existing holdings.
In addition to the bitcoin reserve, a "U.S. Digital Asset Stockpile" will be established, including tokens other than bitcoin, but no further additions will be made beyond those acquired through forfeiture proceedings.
The White House summit on cryptocurrencies is expected to reveal more details. Sacks stated that the U.S. government will aim to maximize the value of its holdings in the reserve, likening it to a digital Fort Knox for cryptocurrencies.
While some critics view the move as benefiting an already wealthy industry, proponents argue that a reserve could allow taxpayers to profit from crypto price appreciation.
Sacks estimated the government possesses roughly 200,000 bitcoins, suggesting the premature sale of these assets has cost taxpayers $17 billion, though no specifics on these figures were provided.
Trump's backing of the crypto sector has been met with mixed reactions, with some expressing concern over potential giveaways to a privileged group and skepticism towards the industry's legitimacy.
Lastly, Trump's own involvement in the cryptocurrency realm includes the launch of meme coins by his family and a stake in the crypto platform World Liberty Financial, with his business dealings monitored by external ethics advisors.