The Trump administration is promoting cryptocurrency-friendly policies, exploring the establishment of a national Bitcoin reserve, and improving the regulatory framework to solidify the United States' leadership in the global crypto economy.
Author: Stefanie Wayco, Matthew Catani
Translation: Baihua Blockchain
1. Trump Administration's Policies
1) The Trump Administration is Moving Towards Cryptocurrency-Friendly Policies
U.S. President Donald Trump is gradually pushing for the establishment of a government that supports cryptocurrencies. One clear signal is his appointment of David Sacks as the White House Commissioner for Artificial Intelligence and Cryptocurrency Affairs.
This appointment has sparked widespread speculation: how will the so-called "Commissioner for Cryptocurrency Affairs" operate? Does this position have real policymaking power? Will it promote a clearer regulatory framework? Is Sacks merely an advisor without formal government duties and powers? Will this role facilitate a new national-level cryptocurrency reserve mechanism for the government to hold and protect digital assets?
2) National Cryptocurrency Reserve: Promoting the Integration of Regulation and Blockchain Technology
If the U.S. supports the establishment of an official cryptocurrency reserve, it could bring much-needed policy clarity to the current digital asset space, such as clarifying which government agency regulates cryptocurrencies. This would not only help promote the full integration of cryptocurrencies in daily payments and investments but also facilitate the application of blockchain technology in large government projects.
As the most widely recognized digital asset, Bitcoin has long been seen as the industry standard, and Trump has publicly supported calls for the establishment of a strategic Bitcoin reserve.
Under new government leadership, the U.S. has the opportunity to lead a wave of innovative transformation, ushering in a new era centered on digital credit and global acceptance—not limited to Bitcoin but encompassing the entire cryptocurrency ecosystem, regardless of whether they are defined as securities or commodities.
2. Digital Asset Diplomacy: How the Federal Reserve Can Utilize Cryptocurrencies
1) The Role of the Federal Reserve
The Federal Reserve, as the central bank of the United States, is responsible for managing monetary policy, controlling inflation, regulating financial institutions, ensuring the efficient operation of payment systems, and protecting consumer rights.
A core feature of the Federal Reserve is its political independence, which allows it to focus on long-term economic stability. At the same time, it must work closely with other federal agencies, such as the U.S. Department of the Treasury, Securities and Exchange Commission (SEC), and Federal Deposit Insurance Corporation (FDIC), to provide comprehensive regulation and financial stability.
For example, the Federal Reserve collaborates with the Treasury to manage government debt issuance and bond market liquidity, works with the SEC to maintain stability in financial markets, and partners with the FDIC to ensure deposit safety and maintain the integrity of the banking system.
To achieve these goals, the Federal Reserve employs various policy tools, including adjusting interest rates to influence borrowing costs, buying and selling government bonds through open market operations to regulate market liquidity, and setting reserve requirements to ensure banks maintain sufficient liquidity.
Additionally, the Federal Reserve is responsible for overseeing the core components of the national payment and settlement system, including electronic payment processing and money supply management. Whether the Federal Reserve will further engage in the cryptocurrency space as part of U.S. financial policy in the future remains to be seen.
2) The Vision for Cryptocurrency Reserves
The cryptocurrency reserve plan proposed by Trump—whether to enhance financial stability, curb inflation, manage national debt, or promote innovation—requires strategic collaboration, and the Federal Reserve is undoubtedly the most suitable institution to lead this process.
Just as it plays a role in traditional asset management, if the Federal Reserve can participate in the management of cryptocurrency reserves, it can ensure that the plan aligns with overall fiscal and monetary policy goals and directly influence its success.
Moreover, the new administration's acceptance of cryptocurrencies reflects its confidence in the Federal Reserve's ability to effectively manage cryptocurrency reserves.
National cryptocurrency reserves can be viewed as a strategic financial tool similar to traditional reserve assets like gold. Proponents argue that establishing cryptocurrency reserves can help reduce national debt, release more dollar liquidity, and establish cryptocurrencies as long-term financial assets.
Regardless of whether crypto assets are classified as securities, commodities, or currencies, such a reserve mechanism could become a stabilizing factor in the market and enhance the credibility and trustworthiness of cryptocurrencies, elevating their status within the financial system.
3. Cryptocurrencies: New Commodities and the "Digital Gold" Standard
1) Historical Background and Standards of the Financial System
Financial standards play a crucial role in economic stability and consumer trust. Historically, the gold standard provided a fixed monetary value framework, anchoring the value of national currencies to a specific amount of gold.
Under the gold standard, currencies could be exchanged for gold at fixed rates, providing stability and predictability for financial markets and international trade. Central banks maintained fiscal discipline by holding gold reserves and restricting the money supply to match the scale of their gold reserves.
Today, the U.S. government guarantees various securities through the "full faith and credit" system, ensuring asset reliability even without physical backing. This principle refers to the government's unconditional guarantee to meet its debts, thereby enhancing market confidence in government-issued securities.
For investors, government credit guarantees make investment instruments like U.S. Treasury bonds safer and more reliable, as these debts rely on the government's taxing power or currency issuance capacity, providing a stable credit system for the market.
From a policy perspective, the government credit system enables the government to efficiently raise funds through debt financing to support infrastructure projects, emergency relief programs, and other critical national initiatives. It also serves as the foundation for broader financial system trust, underpinning various policies that promote economic growth and resilience.
If cryptocurrencies can gain more formal recognition within this framework, they may become the new strategic reserve asset following gold and government bonds, potentially driving the global financial system into the "digital gold" era.
2) Cryptocurrency Plan: Moving Towards a Clear Regulatory Framework
Wyoming Senator Cynthia Lummis has been advocating for the establishment of a national Bitcoin reserve, envisioning the accumulation of 1 million Bitcoins over 20 years to hedge against inflation and serve as a supplementary asset to the dollar.
The proposal includes converting the Federal Reserve's gold certificates into Bitcoin and establishing a strategic reserve that requires holding for at least 20 years.
The future regulatory framework for cryptocurrencies must address the following key issues:
Property rights and ownership protection
Secure custody solutions
Which agency regulates cryptocurrencies
When and how to determine based on the 1946 U.S. Supreme Court case SEC v. Howey whether it is a security, and whether it should be classified as a commodity
Lummis's proposed Cryptocurrency Regulatory Act aims to address these regulatory challenges and clearly distinguish between securities and commodities to simplify compliance processes for cryptocurrency businesses. The act also designs specific funding support mechanisms and a regulatory framework, planning to transfer some regulatory authority over crypto assets from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC).As the cryptocurrency market rapidly evolves, courts face challenges in determining whether certain digital assets are securities or commodities. Current legal standards still have many gray areas, making it difficult for the industry to adhere to a unified regulatory standard. Therefore, a clearer and more comprehensive regulatory framework is essential.
The Howey test remains applicable, but this law established in 1946 is no longer fully applicable to cryptocurrencies, as courts at that time could not foresee the emergence of digital assets.
Although digital assets themselves are not equivalent to securities, if the new administration fully promotes the development of the crypto industry and embraces cryptocurrency reserves, then establishing a new regulatory framework to clarify the boundaries between securities and commodities may become a reality.
Clearer legal standards and regulatory frameworks will help businesses operate cryptocurrency trading platforms more effectively, make it easier for institutional investors to participate in the market, allow consumers to trade and use digital assets without worry, and continuously enhance market confidence and trust in cryptocurrencies.
3) Strategic Petroleum Reserve Model: Lessons for Cryptocurrency Reserves
The U.S. Department of Energy (DOE) demonstrates how government management of the Strategic Petroleum Reserve (SPR) can influence markets and policies.
Although the Strategic Petroleum Reserve primarily targets the energy sector and indirectly affects a wide range of consumers, which differs from the cryptocurrency industry, it can still serve as a foundational model for establishing cryptocurrency reserves.
The core functions of the Strategic Petroleum Reserve include:
Stabilize oil prices, preventing severe market fluctuations
Offset fiscal deficits, providing financial leverage for the government
Enhance global market influence, providing strategic advantages in international energy competition
Similar to the role of the SPR in energy markets and inflation control, cryptocurrency reserves can also influence the digital asset market and even become a monetary policy tool.In the management mechanism of the SPR, the DOE is responsible for **daily operations**, but the **President has the authority to order the use of reserves**, and Congress can also authorize the **sale of SPR crude oil** to **support government spending or respond to emergencies**, such as legislatively mandated periodic sales to adjust reserve levels. Therefore, **the Strategic Petroleum Reserve not only affects financial and monetary policy but also has a direct impact on energy markets, commodity prices, and inflation expectations**. **Similarly, cryptocurrency reserves can**: * **Stabilize the crypto market**, reducing price volatility * **Hedge against economic instability**, providing financial safe-haven tools * **Influence the global adoption rate of cryptocurrencies**, enhancing the U.S.'s dominant position in the digital asset market **How Congress authorizes SPR** **funds for government projects may also determine the future use of cryptocurrency reserves through legislation**. 4. **Bitcoin Reserves: A New Role for the Federal Reserve** ------------------- If a **national Bitcoin reserve** is established, the **Federal Reserve (Fed)** will play a role in the crypto market **similar to** the **SPR** in the energy market, while the **CFTC (Commodity Futures Trading Commission)** can take on **regulatory functions similar to** the **DOE**, responsible for **the execution and regulation of cryptocurrency reserves**. In this model, the Federal Reserve can not only: * **Strategically formulate cryptocurrency-related policies** * **Manage and stabilize government-held crypto assets** * **Ensure sufficient reserve assets to meet fiscal needs and generate returns** * **Protect investor interests and ensure market stability** Additionally, the Federal Reserve will retain its core functions, including: * **Setting interest rates**, influencing market liquidity * **Borrowing and fundraising**, promoting government projects * **Using cryptocurrencies as collateral**, enhancing fiscal flexibility The **bill proposed by Lummis** also emphasizes that the U.S. Department of the Treasury will play a **key role in managing and protecting Bitcoin reserves**, just as it currently collaborates with the Federal Reserve. ### 1) **The Future of Decentralized Crypto Vaults** To enhance **transparency** and **security**, the government may adopt **decentralized vault systems** as a **storage solution for national crypto reserves**. The Treasury can: * **Manage and regulate the custody of crypto assets**, ensuring the safety of national reserves * **Establish custody mechanisms that meet regulatory standards**, preventing asset misuse * **Ensure reserves are transparent**, aligning with market trust mechanisms for government asset management This mechanism not only **addresses ownership and custody issues** but also **boosts public confidence in cryptocurrencies**, promoting **societal recognition of "full faith in crypto"**.  ### 2) **The Balancing Act: Efficiency, Innovation, and Development** The concept of a national cryptocurrency reserve presents a **vision for reshaping the U.S. economy**—integrating **traditional financial principles** with **emerging digital technologies**, driving the financial system towards modernization. However, the **evolution of cryptocurrency policy** marks a significant turning point, transitioning from Bitcoin's initial **decentralized vision** to a **more regulated, government-led model**. **The core challenge is**: how to **balance** the historical ideals of decentralization while **ensuring users can efficiently, safely use, invest in, and innovate with digital assets**. Even though the industry still emphasizes decentralization, its development has reached a stage where **regulation is urgently needed**. In the face of **ambiguous legal standards** and **the lack of consumer protection mechanisms**, moderate **government regulation and policy guidance** have become inevitable. The new administration's **trust and support for cryptocurrencies** also indicate that a **policy framework is about to be implemented**. Establishing rules is crucial because **only with clear rules can market participants compete fairly**. **By embracing cryptocurrencies, the new administration is expected to promote a future centered on innovation, stability, and global leadership**. Whether at the **federal level**, through **state government initiatives**, or **regulatory reforms**, the U.S. stands at the **crossroads of a new era for digital assets**, and its **strategic vision and adaptability** will determine the future landscape of the industry. ### 3) **Regulatory Balance: Challenges and Opportunities in Policy Advancement** **Congress's approval** still faces resistance. Some lawmakers express concerns about **economic stability and inflation issues**, while **ongoing regulatory uncertainty** and **public skepticism** may hinder the implementation of cryptocurrency reserves. The new government's **key task** is to **find a regulatory balance between efficiency and innovation**. Only under **appropriate oversight** can national cryptocurrency reserves and the entire crypto industry **thrive in the U.S.** It is worth noting that **as other countries accelerate the implementation of cryptocurrency policies, the U.S. may fall behind in global competition if it does not take proactive measures**. **Establishing cryptocurrency reserves and introducing supportive regulations** will not only solidify the U.S.'s leadership in the **global crypto economy** but also drive **technological innovation and capital investment** growth. ### 4) **America's Responsibility: Building Confidence as a Global Crypto Capital Center** The U.S. has always set **high standards for consumer protection, data security, and financial transaction rules** as a leader in global capital markets. If other countries take the lead in **digital asset regulation** while the U.S. fails to follow suit, the global market may be subject to **more unstable policy influences**. Therefore, the U.S. should **clearly express its trust in cryptocurrencies ("full faith in crypto")** and, as a **global crypto economic center**, formulate more robust policies. **Author Information:** * **Stefanie Wayco** is a partner at **Duane Morris LLP** * **Matthew Catania** is a senior attorney * **Gregory Bailey** is an attorney **Disclaimer:** This article represents the personal views of the authors and does not reflect the positions of their respective companies, clients, or **Portfolio Media, Inc.** and its affiliates. The article is for general informational purposes only and **does not constitute legal advice**. Article link: https://www.hellobtc.com/kp/du/03/5698.html Source: https://www.duanemorris.com/articles/blueprint_for_national_bitcoin_reserve_0125.html
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