President Trump suggested that the federal government holds digital currencies, and some media and politics pushed back to the terrible warnings of Impact on US dollar. But the reality of Trump’s proposal is very different from the painting of Trump’s hysteric critics. BTC is not a threat to the US dollar and the US government holding BTC or any other digital currency is not an endorsement.
The US dollar is still dominant in the world, representing about 60% of all money held by the middle banks, until December 2024, According to the IMF. Unlike fiat currencies, Bitcoin and other digital currencies are not governed by any central bank. Thus, there is no way to have a relationship with the enemy with the BTC who gave the BTC – unlike the Chinese Yuan or Russian rubles.
Most of the Forex reserves held by the US are Euros and Chinese Yuan. But no one calls for the US to stop holding Euros. That’s because handling a reserve money is not a endorsement of that money. Countries hold forex reserves especially for liquidity purposes – mainly to facilitate foreign trade with counterparts that use other currencies. And, since BTC and ETH are the largest digital currency, the most liquid and the largest amount of USD transactions, it makes sense for the US to handle the money.
Most importantly, the size of the US dollar dwarfs BTC. The USD value is over 1,150x greater than BTC at $ 2,300 billion USD compared to nearly $ 2 billion for BTC. And the BTC is only ranked as the 16th largest foreign currency in the world, measured by the USD, As the start of 2024. Thus, if the US held 50,000 BTC, it would represent less than 5% of foreign currency reserves.
Plus, the US has a wide gold and silver reserves, either of which is still used as the currency of any major country. There seems to be no risk that these US handles can be considered a gold endorsement as a currency, even if the gold is held by the US, in part, as it is a great store-of-value.
Critics of digital currencies argue that they have no natural value – but as it is said that a picasso has no natural value, apart from the natural amount of dried paint and an old canvas. What a Picasso has is the social value and deficiency – the same resources of value as BTC. The social value of Bitcoin came from its purpose to deliver a role out of control of governments. The value of its deficiency works to support the price of BTC and enhances its utility as a store-of-value.
There is another reason for the US to hold virtual money. They represent a major leap to financial technology and in the most important interests of the United States ahead of Fintech. Not only does it make the US the most efficient financial player, but also be best prepared for changes that may come in the future. Blockchain technology has proven that many uses beyond digital currencies, including reducing transaction costs thus benefiting all consumers.
Thus, not only is Trump’s proposal based on the solid economy and is in accordance with the handling of other foreign currencies, but, too, it provides assistance to the FinTech sector. It is smart and looks forward. Sounds like a double win for the US
