To be completely honest, when I first heard of the current administration's plan to stockpile cryptocurrencies, I wasn’t all that interested. Crypto can often seem nebulous, complicated, and more the speed of Reddit bros. The domain of Reddit bros it may be, but it turns out that this is also the domain of elected officials who have quite a bit to gain from an inflated crypto market.
Trump’s bullish stance on crypto was a key pillar of his campaign. He vowed to make America the "crypto capital of the world," arguing that it is, in fact, our duty as a nation to be at the forefront of this burgeoning industry. And he has been doing his very best to follow through on this promise. In addition to appointing David Sacks as “crypto czar,” on March 6th, Trump signed an executive order establishing the new Strategic Bitcoin Reserve and U.S. Digital Asset Stockpile.
What does this mean? Well, traditionally, governments come into possession of large swaths of cryptocurrency through criminal asset seizures. In the U.S., the Marshals Service then holds regular auctions to sell off the cryptocurrencies that have been captured. The creation of this reserve marks a new plan, for Bitcoin at least. This plan is simply to never sell, instead amassing billions of dollars worth of assets to be held indefinitely.
This is not, in and of itself, an outlandish idea. It would boost the value of Bitcoin and allow the government to sit on a growing pile of assets that don’t, as of now, require any outside funding. There are even claims that a crypto reserve could be an effective way to pay down the national debt. What’s concerning is that, in addition to Bitcoin, Trump has floated the idea of stockpiling more volatile coins like XRP, Solana, and Cardano—potentially at the expense of taxpayers.
For some quick background, Bitcoin is generally seen as the “original” cryptocurrency. Its limited supply and relative stability make it by far the most valuable asset of its kind. Even major crypto investors have expressed trepidation about introducing these coins that are unproven as a store of value. If added to the reserve, we could end up locked into assets that are extremely volatile and have no promise of retaining their worth.
The reserve and stockpile are interesting developments, but more importantly, they signal that the Trump administration is serious about deepening its ties to this industry. Trump himself launched a meme coin (a cryptocurrency based on a meme or trend) called $TRUMP in January. He seems to have conveniently forgotten calling the entire crypto industry a scam less than four years ago. Crypto itself might not be a scam, but it is certainly an industry plagued with them.
A major issue is that these assets remain largely unprotected, with limited paths for restitution for those who have been defrauded. One of the most dangerous ways digital currencies can be weaponized is through a scam called a rug pull. This is an exit scam where developers hype up a project (like a meme coin), raise funds, and then suddenly abandon it, taking off with the profits. Their sudden liquidation leaves investors with nothing.
Javier Milei, the president of Argentina, was recently involved in a high-profile rug pull. Milei voiced support for a coin called $LIBRA on X. The coin was advertised with slogans and messaging that seemed to mirror the president’s brand. After his endorsement, the project briefly reached a $4 billion market capitalization, only to suddenly crash as the developers made off with the profits, leading to millions in investor losses.
Milei is facing a fraud probe, but with nothing tying him directly to the coin, it seems unlikely that he will face any real consequences. Milei is not alone, celebrities like Logan Paul and Hailey Welch have also faced recent rug pull controversies. Recently Justin Sun, a businessman who pumped $75 million into a crypto token tied to the Trump family, had his fraud case dropped by the Securities and Exchange Commission.
While certainly not representative of crypto as a whole, rug pulls and meme coins do tell us something about the legitimacy, or lack thereof, of this space. Of course, there will be no meme coins in the federal reserve or stockpile. But the fact that the existence of this reserve has artificially inflated the value of its assets and enriched those behind it makes it harder to believe that the real goal is to benefit the American taxpayer.
Naturally, crypto has many supporters, and this reserve is not without its pros. There are multiple proposals for budget-neutral strategies to accumulate additional assets, although the president hasn’t ruled out using taxpayer dollars for this. Moreover, it’s looking likely that Congress will consider legislation that would classify crypto as a commodity, which could help add protections against fraud.
There is also this claim that the reserve will be an effective way to help pay down the national debt. But that approach is at odds with the core idea of any reserve, holding the assets so that their value continues to increase. In fact, this gives us a peek into a fundamental problem with any cryptocurrency: large-scale liquidation of these assets drives down their value. This makes crypto, at best, unreliable as a mechanism for debt reduction and, at worst, directly self-defeating.
The debate over crypto is about more than the merits of digital currency itself. I have no doubt that there will always be haters and those who unfailingly hype these projects. This should be a discussion about whether or not we’ve learned our lesson about unchecked financial speculation. The current administration's ambitions could lead us into a bold new frontier or be a multi-billion-dollar miscalculation. It seems prudent to avoid involving taxpayer dollars until we are a little more certain that the outcome will not be the latter.
