(TNND) — Cryptocurrencies got a boost this weekend when President Donald Trump reiterated his desire for a U.S. crypto reserve.
Trump said on social media that the crypto reserve would “elevate this critical industry” and mentioned his executive order that directed a working group to explore the potential of a national digital asset stockpile.
“I will make sure the U.S. is the Crypto Capital of the World,” Trump said via a Sunday morning social media post, mentioning a few cryptocurrencies by name – XRP, solana, cardano, bitcoin and Ethereum.
Brad Garlinghouse, the CEO of Ripple, a provider of digital asset infrastructure for financial institutions, applauded Trump’s vision for a crypto reserve.
“Maximalism is the enemy of the industry’s progress,” Garlinghouse said via social media. “Glad to see POTUS recognizing we live in a multichain world and that we’re finally moving past Bill Hinman and the Biden administration’s SEC’s very broken thinking. I will certainly continue to champion this while in Washington at the end of this week.”
Trump’s support for crypto goes back to the campaign trail.
He spoke last summer at Bitcoin 2024, an industry conference, telling attendees that he wanted to make America the “crypto capital of the planet and the bitcoin superpower of the world.”
“And if there’s one hallmark of the administration, it’s that they are staying true to their campaign promises,” said Roger Nober, the director of the George Washington University Regulatory Studies Center.
“Should we? It depends on what you’re trying to accomplish,” Nober said.
Nober said a U.S. crypto reserve might be more of a market signal than anything else.
Or it could be an unorthodox way of positioning the U.S. to be a crypto regulatory and policy leader, he said.
“I think at some point you have to ask what’s the purpose of it,” Nober said. “I mean, we’ve had strategic reserves for petroleum. We have gold. We have helium and other precious metals. I don’t think a crypto reserve would serve quite the same functions.”
Another crypto expert said he thought a reserve would be a bad idea.
“I think of all the suggestions, all the ideas around cryptocurrencies, I think this might be one of the worst I’ve seen,” said Leonard Kostovetsky, an associate professor of finance at Baruch College. “There’s absolutely no reason for the U.S., which already is in debt, basically to have a leveraged position in cryptocurrencies. There’s no advantage to it. There’s no reason for it. There’s no kind of economic theory behind it. So, I don’t see why it’s necessary.”
Kostovetsky, however, doubted a crypto reserve would be very harmful to the nation, depending on the size of the reserve.
But Kostovetsky warned that messy conflicts of interest and opportunities for corruption could arise if the government is in the business of picking and choosing investments.
Kostovetsky said he was somewhat surprised to see Trump mention several cryptocurrencies by name.
XRP, solana, and cardano – the lesser-known cryptocurrencies mentioned by Trump – saw spikes in their prices Sunday.
The crypto market overall has benefited from Trump’s support.
The popular bitcoin was valued at about $70,000 right before the election. In the weeks after Trump won the election, bitcoin surged above $100,000.
Bitcoin dipped a bit last week but then also saw a price increase coinciding with the president’s announcement.
Trump’s executive order said the national digital asset stockpile could potentially be derived from crypto seized by the federal government through law enforcement efforts.
The U.S. government already holds billions of dollars worth of crypto from asset seizures.
It’s unclear if that would be the extent of a U.S. crypto reserve or if the government would buy additional crypto.
“Is the government going to be running a trading firm, or (are we) just going to keep buying at whatever the market price is?” Kostovetsky said.
Either way, Kostovetsky said a crypto reserve won’t protect the government during an economic emergency.
“Cryptocurrencies are extremely volatile, so it’s not clear that it’s going to be a hedge like gold,” he said. “If the economy crashes, as we’ve seen in the past, cryptocurrencies have crashed as well.”
Nober said crypto “value is in the eye of the beholder.”
He, too, said crypto is a highly volatile investment.
Cryptocurrencies operate through blockchains, or decentralized digital ledgers.
Unlike normal financial assets, like stocks and bonds, crypto is an asset whose entire value depends on what people are willing to pay for it at a period in time based on what they think someone else will pay for it in the future.
“What is crypto? Is it a security like a Microsoft stock? Is it a commodity, like hard red winter wheat? Or is it just kind of nothing, like a prop bet of who wins the coin flip at the Super Bowl?” Nober said.
“The interesting thing about crypto is it has elements of all three and then none of the above, which is the fact that they’re algorithms and they’re created,” he continued.
Federal Reserve Chair Jerome Powell previously said the central bank isn’t allowed to own bitcoin and isn’t looking for a law change to allow the government to hold a crypto reserve.
Nober said a crypto reserve established through an executive order might happen fast, but it wouldn’t offer durability.
The next president could come in and scrap the crypto reserve with their own executive order.
For a lasting crypto reserve, Congress might need to get involved and create the statutory framework, he said.
