Establishing Bitcoin Reserves in the U.S.: Will It Open a New Era in Global Finance?

Author: Lubna Kayyali | Blockchain in Plain Language

The United States is setting a precedent. According to a post by White House cryptocurrency chief David Sacks on X, President Trump signed an executive order on March 6, explicitly establishing a strategic Bitcoin reserve. However, the order only requires a comprehensive inventory of the Bitcoin held by the federal government and does not involve other Bitcoins in the market (over the years, the U.S. has accumulated 200,000 Bitcoins through various legal cases, currently valued at approximately $17 billion).

This policy has caused market turbulence, with Bitcoin dropping by 5% to around $85,000 shortly after the announcement. At the same time, it has sparked widespread discussion about its economic value, legal basis, and geopolitical implications.

This article will delve into this development: from the post-World War II gold reserve system to the impact of U.S. crypto reserves on global finance, monetary policy, and law.

 01 
Historical Background: From Gold to Crypto Assets

The concept of national currency reserves has a long history. After World War II, the Bretton Woods Agreement in 1944 established an international monetary system centered on gold, linking the U.S. dollar to gold at a fixed rate of $35 per ounce. At that time, the U.S. controlled about two-thirds of the world's gold reserves, which solidified the dollar's position as the pillar of the global financial system. Under this gold exchange standard, currencies were pegged to the dollar, which could be directly exchanged for gold. This system provided financial stability and spurred global economic growth for the next two decades.

However, by the late 1960s, the U.S. faced pressure on its gold reserves due to persistent balance of payments deficits and surging demand for dollars. In August 1971, President Nixon announced the suspension of the dollar's convertibility into gold, officially ending the Bretton Woods system and ushering in an era of floating fiat currencies. Since then, the dollar has become a purely fiat currency, supported only by government credit.

Despite the collapse of the Bretton Woods system, U.S. gold reserves remain an important asset for central banks. As of today, the U.S. official gold reserves still amount to 8,133 metric tons (the largest in the world), a legacy asset from the Bretton Woods era.

The long-term appeal of gold lies in its anti-inflation and safe-haven properties. Since 1944, when it was $35 per ounce, the price of gold has skyrocketed to about $1,900 per ounce, reflecting decades of fiat currency expansion. Meanwhile, the modern financial system has developed around the dollar, which remains the dominant global reserve currency.

As of mid-2023, the dollar accounts for about 59% of global foreign exchange reserves (down from over 70% in early 2000, indicating a diversification of reserve assets).

Today, the main international reserve assets include: foreign exchange reserves (primarily in dollars, euros, yen, etc.), Special Drawing Rights (SDR) introduced by the International Monetary Fund (IMF) in 1969, and gold.

The Rise of Bitcoin as "Digital Gold"

In 2009, Bitcoin was born as a decentralized digital currency with a fixed supply of 21 million coins, and it is viewed by many as "digital gold." For most of the 2010s, cryptocurrencies remained a niche investment, but by the 2020s, the total market capitalization of the crypto market had reached trillions of dollars, attracting the attention of mainstream institutions.

In 2021, El Salvador became the first country in the world to adopt Bitcoin as legal tender, and its treasury currently holds over 5,700 BTC (El Salvador launched a $360 million Bitcoin treasury monitoring website). Meanwhile, private companies like MicroStrategy and Tesla have also included Bitcoin on their balance sheets, and dozens of investment funds have launched crypto-related products. As the influence of Bitcoin and other crypto assets continues to rise, discussions have begun about whether they can play a role in national reserves similar to gold.

U.S. politicians, such as Senator Cynthia Lummis, have even proposed the establishment of a "Bitcoin Strategic Reserve" to ensure the nation holds a certain amount of Bitcoin. She submitted a bill to Congress in 2024 proposing to purchase up to 1 million BTC (about 5% of the total Bitcoin supply) as a strategic asset and hedge tool. Although the bill did not advance at the time, this concept laid the groundwork for recent decisions by the new government.

 02 
Economic and Geopolitical Implications of U.S. Cryptocurrency Reserves

The market reacted swiftly to the news of the U.S. establishing crypto asset reserves. Just days ago, President Trump announced that Bitcoin, Ethereum, XRP, Solana, and Cardano would be included in the U.S. strategic reserves, which immediately triggered a surge in the crypto market—Bitcoin's price rose over 11% (to about $94,000), Ethereum increased by 13% (to about $2,516), and the total market capitalization of the crypto market increased by over $300 billion within hours. This surge reflects the general sentiment among investors: government endorsement could enhance the credibility and longevity of these crypto assets.

21Shares analyst Feder1C0 Brokate pointed out, "This move indicates that the U.S. government is actively engaging in the crypto economy." In other words, the U.S. is leveraging its national influence to shape the future direction of the crypto market.

1) Monetary Policy and Fiscal Stability: Opportunities and Challenges

Supporters argue that crypto asset reserves could enhance the fiscal resilience of the U.S. Senator Cynthia Lummis stated that Bitcoin could serve as a hedge against inflation and the ballooning national debt, allowing the government to sell some assets to repay debt when prices rise. Historically, high inflation and fiscal deficits have often driven investors toward hard assets like gold, pushing up their prices.

"Strategic holdings of Bitcoin can serve not only as a safe-haven asset but also allow the government to sell at high prices to reduce debt," economist Will Alden commented. Theoretically, when the dollar weakens or global uncertainty rises, crypto asset reserves could appreciate, providing a buffer for fiscal stability. Additionally, the establishment of reserves could release dollar liquidity for other uses rather than continuing to hoard foreign exchange or gold. If the crypto market continues to grow, the U.S. could potentially reap excess returns.

Opponents warn that the policy carries significant risks and uncertainties. The price of cryptocurrencies is highly volatile, and large-scale government purchases could raise concerns about the U.S. fiscal situation, potentially fueling expectations of rising inflation and creating a self-fulfilling crisis. Economist Thomas Hendrickson pointed out that if the market interprets the U.S. shift toward Bitcoin as a loss of confidence in the dollar, it could undermine global trust in U.S. fiscal stability and the dollar. Furthermore, government entry could inflate crypto asset prices, creating a bubble, and if the market crashes, taxpayers would bear the losses.

Some critics also question the necessity of crypto reserves. Norbert Michel, an economist at the Cato Institute, believes the government should focus on more pressing economic issues rather than investing in Bitcoin: "There are more important matters to address."

2) Global Financial Competition and U.S. Leadership

The implementation of this policy is related to the competition for global financial leadership. By establishing crypto asset reserves, the U.S. is attempting to assert influence in the crypto space and seize the initiative.

The U.S. has chosen open, decentralized crypto assets rather than central bank-led digital currencies, creating a global contrast of "freedom vs. control." CoinShares' James Butterfill noted, "This decision aligns with the 'America First' agenda, showcasing a more nationalist stance in support of crypto technology."

He also emphasized that the inclusion of assets like Solana (SOL) and Cardano (ADA) in reserves (which are more akin to tech stocks than store-of-value assets) indicates the government's support for domestic blockchain innovation. This move could not only enhance the development of the U.S. fintech industry but also solidify the dollar's dominant position in global crypto trading (currently, most stablecoins are pegged to the dollar).

3) Geopolitical Implications: Global Effects and Power Dynamics

Other countries will closely monitor the implementation of this policy. U.S. actions may prompt allies to incorporate crypto assets into their national reserves or fiscal investments to avoid falling behind in the global financial digitalization process. Additionally, this trend may push institutions like the International Monetary Fund (IMF) to reassess the role of crypto assets in the global reserve system.

For countries heavily reliant on the dollar, the U.S. crypto reserves may be seen as an endorsement of the "digital gold" concept, further promoting the mainstream adoption of Bitcoin. However, the large-scale holding of crypto assets by the U.S. could also raise concerns:**

· Will the U.S. hold too much influence in decentralized networks?

· If the government holds 1 million BTC, it would become the largest single holder globally, potentially affecting market liquidity and even dominating governance decisions in certain blockchain protocols.

"If other countries act first, the U.S. may fall behind," analysts at Duane Morris LLP noted in a report, stating that establishing crypto reserves and creating a clear regulatory framework could be key to ensuring U.S. leadership in the global crypto economy.

In short, the U.S. crypto reserves are not just an investment decision but part of a financial strategy. They could impact the global financial landscape, related policies, national fiscal stability, and even the geopolitical balance of power.

Image Source: Christine Roy, Unsplash

 03 
Legal and Regulatory Implications: Exploring Uncharted Legal Territory

Establishing federal cryptocurrency reserves brings new legal challenges and requires navigating a rapidly changing regulatory environment. As of now, U.S. laws and regulatory agencies do not have a unified definition of crypto assets, which may be classified as securities, commodities, property, or currency, while a series of court rulings and government actions are gradually defining their legal boundaries.

Previously, several key court cases, administrative rulings, and regulations have provided important references for the management and potential limitations of cryptocurrency reserves.

1) Securities Law – SEC v. Ripple (2020–2023)

A landmark case is the U.S. Securities and Exchange Commission (SEC) suing Ripple Labs, accusing it of selling XRP as an unregistered security. In July 2023, Judge Analisa Torres of the Southern District of New York made two somewhat contradictory rulings:

· Ripple's sale of XRP on the secondary market does not constitute a securities transaction;

· Ripple's direct sales of XRP to institutional investors violate securities laws.

This indicates that the same crypto asset may have different legal attributes in different trading scenarios and provides the first judicial precedent regarding the applicability of the 1946 Howey Test (which determines whether an investment contract is a security) in the realm of digital assets.

The ruling shows that tokens like XRP may not necessarily be subject to SEC regulation when traded in the retail market, meaning widely circulated crypto assets like Bitcoin and Ethereum may not be classified as securities. This outcome is seen as a victory for the crypto industry, as it limits the SEC's regulatory authority. However, the SEC is still appealing parts of the ruling, and legal uncertainty remains.

This case has significant implications for U.S. cryptocurrency reserves. If the crypto assets in the reserves are later classified as securities, the government may need to comply with stricter regulatory requirements (such as securities custody and financial reporting). Therefore, the reserves are expected to prioritize holding Bitcoin and Ethereum (as they are generally viewed as commodities by regulators), as well as XRP (based on the ruling in the Ripple case, which may not classify it as a security when traded on the open market).

2) Securities Law – SEC v. Coinbase (2023–2025)

In June 2023, the SEC filed a lawsuit against Coinbase (the largest CEX in the U.S.), accusing it of operating as an unregistered securities exchange, broker, and clearing agency, involving multiple crypto asset transactions.

This case became a classic example of the SEC's "enforcement as regulation" approach during the previous administration, where the SEC attempted to regulate the market through over 100 enforcement actions against crypto assets (covering CEX operations, token sales, etc.).

Coinbase not only defended itself in court but also submitted a rulemaking petition to the SEC, essentially asking the SEC (and the federal appellate court) to clarify:

· Which crypto assets are classified as securities;

· How the industry can operate legally and compliantly.

However, by early 2025, there was a significant shift in regulatory winds: under the new government's supportive stance on crypto, the SEC withdrew its lawsuit against Coinbase and terminated investigations into several crypto companies. Although the dismissal alleviated some legal uncertainties for CEXs, the core issue remains unresolved—what crypto assets should be classified as securities still requires new legislation for clarification.

Coinbase and other industry participants continue to urge Congress to establish clear regulations, as the decades-old Howey Test and the current securities regulatory framework are increasingly inadequate for the modern crypto market.

For U.S. crypto asset reserves, the SEC's conclusion of the Coinbase lawsuit is a positive signal:

· This indicates that regulators will not use "unregistered securities" as a reason to prevent the government from holding or trading crypto assets;

· It also suggests that the regulatory environment is becoming more lenient, potentially reducing legal barriers for national crypto reserves in terms of custody and management.

In other words, while uncertainties in securities law remain, the feasibility of government managing crypto reserves is continuously increasing.

3) Commodity Classification – CFTC and Other Agencies

Another important pillar of crypto regulation is commodity law. The U.S. Commodity Futures Trading Commission (CFTC) has long argued that Bitcoin and other virtual currencies fall under the definition of commodities as per the Commodity Exchange Act. Federal courts have recognized this position, granting the CFTC the authority to regulate fraud and manipulation in the crypto market (including the spot market).

In the 2018 CFTC v. My Big Coin case, the judge ruled that the CFTC could regulate virtual assets as commodities, even if they are intangible assets. This ruling aligns with the CFTC's stance that crypto assets like Bitcoin and Ethereum, due to their decentralized and non-issuer nature, are more akin to digital commodities rather than securities.

Additionally, the CFTC has taken enforcement actions against CEXs like BitMEX and BN, accusing them of offering crypto derivatives trading without registration, further solidifying the CFTC's regulatory role in this area.

For U.S. crypto reserves, if the U.S. government holds and trades crypto assets, they may be subject to commodity regulations rather than securities regulations. This typically means more lenient regulatory requirements, but compliance with anti-fraud and anti-manipulation regulations is still necessary. If the Treasury actively manages crypto reserves (for example, by selling Bitcoin at opportune times), it must ensure compliance with market manipulation laws.

Moreover, classifying crypto assets as commodities raises questions about regulatory authority— which agency is responsible for overseeing national crypto reserves? This requires coordination among the Treasury, the Federal Reserve, the SEC, and the CFTC.

Notably, there have been legislative proposals (such as the Lummis-Gillibrand bill) attempting to clarify regulatory jurisdiction, which may place most crypto assets under CFTC oversight, with only a portion classified as securities.

4) Treasury / OFAC – Tornado Cash Sanctions (2022–2024)

The primary function of the U.S. Treasury in the crypto space is to combat illegal financial activities. In August 2022, the U.S. Treasury's Office of Foreign Assets Control (OFAC) first placed Tornado Cash (a decentralized crypto mixing protocol) on the sanctions list and added its smart contract addresses to the blacklist. OFAC accused Tornado Cash of being used to launder over $7 billion in crypto assets, including funds stolen by North Korean hackers, and prohibited U.S. citizens from transacting with addresses associated with the protocol.

However, by the end of 2024, the U.S. federal appellate court overturned this sanction. The Fifth Circuit Court of Appeals ruled that OFAC overstepped its authority because Tornado Cash's open-source smart contracts cannot be considered "property" or a legal target for sanctions. The court noted that immutable software code is neither an organization nor an individual, reflecting the conflict between traditional legal frameworks and the development of decentralized technologies.

This case has profound implications for the government's crypto management policies, as it reveals the legal dilemmas regulators face when dealing with decentralized networks. For U.S. crypto reserves, although Tornado Cash itself will not become a reserve asset, this case indicates that the government must carefully consider the following when managing crypto assets:

· What digital assets does the government actually control?

· Can smart contracts (code) be "held" like traditional assets?

Furthermore, any use of crypto reserves must comply with sanctions and related regulations (AML). For example, the Treasury needs to establish strict compliance mechanisms to prevent transactions with sanctioned addresses or entities.

The Tornado Cash case ultimately exposed that existing laws have lagged behind the development of decentralized technologies, making legislative updates urgent. As Judge Willett pointed out, this is an issue Congress needs to address, and it may progress in tandem with the legislative process for establishing national crypto reserves.

5) Administrative Actions and Regulatory Framework

The regulatory environment for crypto is also influenced by the executive branch. In March 2022, President Biden issued Executive Order 14067 (EO 14067) titled "Ensuring Responsible Development of Digital Assets," requiring federal agencies to study the risks and opportunities of crypto assets. The order outlined policy objectives, including consumer protection, financial stability, combating illegal finance, enhancing U.S. competitiveness, and exploring central bank digital currency (CBDC).

Although this executive order did not create new laws, it facilitated a series of reports and recommendations by the end of 2022 and marked the federal government's acknowledgment that crypto assets have become a long-term component of the financial system. Notably, the order at that time promoted research into a digital dollar (CBDC).

However, by January 2025, President Trump issued a new executive order titled "Strengthening U.S. Leadership in Digital Financial Technologies," which revoked Biden's executive order and adopted a completely different policy stance: the Trump administration firmly opposed the introduction of a U.S. central bank digital currency (CBDC), arguing that it could threaten individual freedoms and privacy.

In contrast, the order explicitly supports privately issued dollar stablecoins and blockchain technology innovation.

Most importantly, Trump's executive order established a working group responsible for developing a regulatory framework for cryptocurrencies and assessing the feasibility of establishing a national digital asset reserve. The working group was tasked with submitting a report on how to implement national crypto reserves within 180 days (by mid-2025).

But how exactly will national crypto reserves be implemented? Any implementation plan may involve utilizing existing legal authorities or require Congress to pass new legislation. Current possible avenues include:

A. Treasury's Exchange Stabilization Fund (ESF)

This fund has historically been used to hold foreign exchange and gold for currency intervention, and its authorization may be expanded to include crypto assets through congressional approval or broad interpretation.

B. Federal Reserve

The Federal Reserve is responsible for managing the U.S. gold and foreign exchange reserves and coordinating with the Treasury. However, the Federal Reserve Act limits the scope of asset purchases by the Federal Reserve, primarily to government securities. Unless Congress amends the law, it remains uncertain whether crypto assets can be included on the Federal Reserve's balance sheet.

C. Strategic Cooperation between the Treasury and the Federal Reserve

Both entities need to collaborate in managing cryptocurrency reserves, similar to their coordination mechanisms in debt management and foreign exchange reserves.

In addition, there have been proposals for "decentralized vaults," suggesting that the Treasury manage the national cryptocurrency reserves to ensure government control over private keys while providing transparency to the public.

Overall, U.S. cryptocurrency regulation is still in a state of dynamic adjustment. Recent victories in court for the crypto industry (the Ripple case, the Third Circuit Coinbase petition case, and the Tornado Cash case), along with policy shifts from the executive branch, indicate that the U.S. is moving towards a more lenient regulatory environment.

However, significant legal issues remain unresolved, including: the classification of different tokens (commodities vs. securities), the legal basis for the government to acquire and hold crypto assets (which may require congressional appropriations or reinterpretation of laws), and how to establish regulatory mechanisms to prevent abuse or mismanagement.

Photo credit: Tingey Injury Law Firm via Unsplash

04
Comparative Analysis: Cryptocurrency Reserves vs. Gold and Fiat Currency Reserves

The strategic cryptocurrency reserves of the United States will become an unprecedented addition to the national asset system, with key differences from traditional gold reserves or fiat currency reserves:

1) Comparison of Supply Mechanisms for Gold, Fiat Currency, and Cryptocurrency

· Gold: Stable Supply, Clear Ownership

The supply of gold primarily relies on mining, with an annual increase of about 1–2%. The total amount of gold mined globally is approximately 208,000 tons, of which central banks hold about 35,000 tons as financial reserves.

The physical characteristics of gold allow governments to choose to store it domestically (such as the U.S. "Fort Knox") or in trusted foreign vaults, with clear and defined ownership.

· Fiat Currency Reserves: Dependent on Central Bank Policy

Fiat currency reserves (such as the U.S. dollar and euro) are issued by foreign central banks, and holding these currencies means relying on the monetary policy of the issuing central bank. For example, holding U.S. dollars means trusting that the Federal Reserve will not excessively issue dollars to prevent devaluation.

Fiat currencies can be exchanged through foreign exchange markets or diplomatic agreements between central banks, unaffected by direct market supply and demand.

· Cryptocurrency: Fixed Supply, Decentralized Operation

The supply of crypto assets operates entirely differently, as it is not controlled by central banks or governments: the total supply of Bitcoin is fixed (21 million coins) and is gradually released according to a predetermined algorithmic schedule, rather than being decided by a central authority.

No government or central bank can change Bitcoin's issuance policy, making it more attractive to those concerned about fiat currency devaluation.

However, Bitcoin's decentralized nature means that no government can "control" its network. Even if a country holds a large amount of Bitcoin, it cannot change its monetary rules or functions.

2) Gold vs. Bitcoin: Differences in Monetary Policy Influence

The decentralized nature of Bitcoin sharply contrasts with the monetary system of the gold standard era:

Gold Era: The U.S. government could adjust the price of gold or suspend gold convertibility (as in the "Nixon Shock" of 1971) to directly influence monetary policy.

Bitcoin Era: Its rules are determined by global network consensus, and governments have no unilateral authority to modify them, regardless of how much they hold.

Additionally, the U.S. must compete in the open market with other investors to purchase Bitcoin, and large-scale government acquisitions could drive up market prices, putting itself at a disadvantage.

3) Volatility and Risk

Compared to fiat currency, gold has shown more stable value over the long term—its price typically rises during inflationary periods, but its volatility is far lower than that of crypto assets. Annual price fluctuations for gold usually range between 10–20%, while the price of crypto assets can fluctuate by 10–20% within a single day, experiencing extreme bull and bear cycles. For example:

Bitcoin surged from about $10,000 in 2020 to $69,000 by the end of 2021;

It plummeted to $16,000 by the end of 2022;

Then rebounded to over $60,000 in 2024.

This volatility is an order of magnitude higher than that of most fiat currencies or gold prices. Therefore, cryptocurrency reserves will significantly increase the volatility of the government's balance sheet.

Under a mark-to-market accounting system, the government's quarterly book gains or losses could experience substantial fluctuations, which could politically spark controversy. No country wants to see the value of its foreign exchange reserves fluctuate dramatically.

The U.S. has a large gold reserve (valued at nearly $500 billion), and if the Treasury sells a significant portion of it, it could impact the global gold market. Therefore, central banks typically coordinate sales or adopt gradual selling strategies to avoid market shocks.

For fiat currency reserves (such as the U.S. dollar and euro), the scale held by countries often reaches hundreds of billions, and the management of these foreign exchange reserves is very cautious to avoid disrupting the foreign exchange market.

In contrast, although the crypto market is growing, it remains relatively small and highly fragmented compared to traditional foreign exchange markets. As of early 2025, the total market capitalization of cryptocurrencies is approximately $2.7–3 trillion, about a quarter of the global gold market size and far less than the global stock or bond markets.

If the U.S. government implements a large-scale purchasing plan (in the hundreds of billions), it could significantly drive up cryptocurrency prices—in fact, merely announcing such a plan has already caused Bitcoin prices to rise by over 10%.

This raises the issue of "execution risk." To avoid significant market fluctuations, the U.S. government may need to adopt the following methods to purchase cryptocurrencies:

· Gradual and discreet purchases to achieve reasonable buying prices;

· Trading through OTC (over-the-counter) methods with large holders to avoid pushing up market prices.

Conversely, in times of crisis, if the government needs to quickly sell crypto assets for fiat currency, such actions could lead to a collapse in crypto asset prices.

Additionally, there is the issue of "liquidity under stress":

For example, during the global market liquidity crisis in March 2020, Bitcoin's price halved within days, while gold and U.S. Treasury bonds demonstrated their liquidity advantages as safe assets.

Although the cryptocurrency market has matured significantly since then, its resilience in a true global macro-financial crisis has yet to be fully tested.

Therefore, while crypto assets are highly liquid under normal market conditions (traded globally 24/7), their reliability as reserve assets during financial turmoil remains uncertain.

4) Custody and Security

Storing gold in vaults, while costly (involving security, insurance, and auditing), is relatively straightforward. Holding fiat currency reserves primarily relies on the account records of central banks or custodial banks, with almost no risk of theft. However, holding cryptocurrencies presents unique cybersecurity challenges.

The ownership of crypto asset reserves essentially depends on control over the cryptographic private keys.

Once a hack or internal threat occurs, it could lead to irreversible financial losses, a risk that does not exist with gold and fiat currency reserves (gold and fiat cannot be stolen or destroyed on a large scale due to hacking, unless physical harm is involved).

Therefore, the U.S. government needs advanced cold storage solutions and multi-layer key management systems (potentially using multi-signature wallets, distributing keys to multiple trusted institutions or officials), and may even need to develop dedicated hardware modules to ensure the security of national cryptocurrency reserves.

Currently, there are limited precedents in this area: some small countries and private institutions have attempted to manage large-scale crypto asset custody; however, the crypto industry has also experienced notorious hacking incidents, such as the 2014 Mt. Gox hack, which resulted in the loss of 850,000 Bitcoins.

If the U.S. crypto reserves experience a custody failure—even a small-scale hacking incident could severely undermine market confidence, making this risk non-negligible.

On the other hand, the transparency of blockchain provides a new accountability mechanism. For example, the U.S. government could follow El Salvador's example by publicly disclosing the blockchain addresses of its reserves, allowing the public to verify the existence of national crypto assets in real-time. This level of transparency far exceeds that of gold reserves (which rely on audit reports, while blockchain data can be queried in real-time).

5) Yield Generation

Gold is a "non-yielding" asset, generating no interest unless it is borrowed.
Fiat currency reserves can earn modest interest through investments in safe bonds or deposits.
Cryptographic assets bring new possibilities for yield generation.

For example, the U.S. government could earn yields by staking or lending certain crypto assets: holding ETH or ADA allows participation in proof-of-stake (PoS) networks, earning protocol rewards.

However, this may raise additional legal issues:

· Does government participation in blockchain validation constitute commercial activity?

· Will this affect the regulatory classification of crypto assets?

Additionally, if the government chooses to earn yields through lending, it also involves counterparty risk. These activities blur the lines between passive reserve assets and actively managed sovereign wealth funds.

Given the current regulatory uncertainty, the most prudent approach may be: initially not seeking yields, but rather viewing cryptocurrencies purely as reserve assets and adopting a "buy and hold" strategy.

Overall, cryptocurrency reserves, like gold, serve as a hedge against risk (their value is independent of the policies of other countries), but they are more volatile and technically complex in comparison.

Unlike fiat currency reserves, crypto assets do not represent claims against other economies, which has both advantages and disadvantages:

Advantages: No credit risk (not influenced by the policies of other central banks like foreign exchange reserves).

Disadvantages: Lack of traditional international cooperation mechanisms (for example, unable to support allies through currency swaps like foreign exchange reserves).

The uniqueness of crypto assets lies in their decentralized and digital nature, providing resistance to censorship (not subject to freezing by foreign issuers) while facing cybersecurity threats (hacking) and uncertain regulatory risks. The U.S. government must weigh these pros and cons.

Image source: Jingming Pan, Unsplash

05
Conclusion: Moving Towards a New Financial Frontier

The establishment of cryptocurrency asset reserves in the United States marks a critical moment in financial history, where traditional asset reserves officially intersect with the digital age. Supporters argue that this initiative can hedge against inflation, enhance financial resilience, and serve as a strategic tool to ensure America's global leadership in the crypto finance sector. However, critics warn that market volatility, legal uncertainties, and risks that could affect the dominance of the U.S. dollar cannot be overlooked.

The success of this plan depends on precise execution, a clear regulatory framework, and robust cybersecurity measures to avoid potential pitfalls and ensure its long-term viability. How the U.S. manages this transformation will provide important lessons for other countries and institutions, influencing their own cryptocurrency asset strategies.

Beyond direct economic and legal considerations, deeper questions remain:

· Will this reserve strengthen or weaken the global position of the U.S. dollar?
· Will its establishment trigger a global digital asset race, or even give rise to new financial games?

As cryptocurrency assets gradually integrate into national reserves, does this mean that a government-level transformation towards decentralized finance (DeFi) is about to begin?

While the U.S. explores this new path, the global financial landscape will also be reshaped. The answers to these questions will impact the monetary system, market evolution, and the distribution of global economic power.
Original title: America’s Crypto Reserve: A New Era
Original link: https://medium.com/@lk99/americas-crypto-reserve-a-new-era-d57f66a46659
Original author: Lubna Kayyali
Translation: Baihua Blockchain

Article link: https://www.hellobtc.com/kp/du/03/5705.html

Source: https://mp.weixin.qq.com/s/8QILMaLPwojnuEyRhsI9NQ

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