On Friday, White House “crypto czar” David Sacks and President Donald Trump will be hosting a crypto summit at the White House. This event comes after Trump’s announcement over the weekend that he plans to create a “crypto strategic reserve” for the country using cryptocurrencies.
The move has caused quite a stir, with many critics, including economists, calling it a “greater fool” scam. However, Trump remains steadfast in his decision, stating that the US Crypto Reserve will elevate the critical industry after years of attacks from the Biden Administration.
In a social media post, Trump wrote, “My Executive Order on Digital Assets directed the Presidential Working Group to move forward on a Crypto Strategic Reserve that includes XRP, SOL, and ADA. I will make sure the US is the Crypto Capital of the World.”
He later added, “And, obviously, BTC and ETH, as other valuable Cryptocurrencies, will be the heart of the Reserve. I also love Bitcoin and Ethereum!”
These declarations caused a surge in the prices of the named cryptocurrencies, resulting in an increase of hundreds of billions of dollars in total value for Bitcoin alone.
While the White House officials have not disclosed the amount that will be placed in the strategic reserve or where the funds will come from, Trump’s “crypto czar” David Sacks has promised to provide more details at the upcoming White House crypto summit.
Sacks, a multibillionaire venture capitalist and cryptocurrency proponent, has divested all his crypto holdings to take on the role at the White House. However, his company reportedly still has stakes in all five of the tokens named by Trump.
If the crypto reserve is funded by taxpayers and amounts to billions, it would mean a massive boost to existing owners of virtual money. Economists have expressed their surprise at the US government’s decision to hold a reserve of something like cryptocurrency.
Conservative economist Douglas Holtz-Eakin, who served as former Senator John McCain’s top economic adviser, said, “It’s great to have the government buy stuff you own, yes. If he invests in my morning emails, I think the country would be better off.”
Stephanie Kelton, a professor at Stony Brook University, quoted Republican writer David Frum, saying, “They’re libertarians who want a US Treasury bailout for their fake money.” She added, “It makes no sense otherwise.”
Trump himself had been a vocal critic of the cryptocurrency industry, calling it a scam and stating that he did not like it because it competed against the dollar. However, his view changed after meeting with crypto investors and receiving large contributions from them for his super PACs during his campaign for the White House.
He even spoke at the Bitcoin Conference last year and promised to make the United States the “crypto capital” of the world. In total, the cryptocurrency industry poured $119 million into Trump’s election, with millions more for his inauguration.
In addition, Trump and his family have personally profited from the industry. They launched the crypto brokerage World Liberty Financial last September, and just days before taking office, Trump issued a digital “coin” from which he and his partners have already earned nearly $100 million in fees.
If the “crypto reserve” ends up with tens or hundreds of billions of dollars, it would be the biggest giveaway to some of the country’s wealthiest since the nation’s “robber baron” days in the 1800s. However, unlike the land given to the robber barons for the purpose of building railways and drilling for oil, it is unclear how ordinary citizens will benefit from a digital assets reserve unless they have personally invested in cryptocurrencies.
Unlike traditional investment assets, cryptocurrencies are based on nothing tangible. They do not make shareholders part owners of a company or provide periodic dividends like stocks, nor do they generate interest payments like bonds. They also do not appreciate in value like a home. Instead, they merely record someone as the owner of a virtual value that exists nowhere but in an electronic ledger.
Massachusetts Democratic Senator Elizabeth Warren criticized the move, saying, “A bitcoin reserve is a little like using US tax dollars to buy stock in Twitter because Donald Trump and Elon Musk are buds. It works great for the people who already own the Twitter stock or the five Bitcoins, but it really sucks for everyone else.”
The value of cryptocurrencies is solely based on what buyers are willing to pay for it at any given moment, leading many mainstream economists to describe it as a “greater fool
