Bitcoin is often touted as an alternative to the US dollar, the world’s reserve currency, as only a limited number of coins will ever be produced. Proponents argue that bitcoin’s fixed supply makes it an inflation-proof value store outside the global financial system. Bitcoin is often compared to gold for a similar reason.

While central banks worldwide keep large reserves of the dollar and gold, until now, only one country — El Salvador — has created a strategic reserve of cryptocurrencies, although several governments do hold them, mostly seized from criminal activities or to circumvent international sanctions.

US President Donald Trump this week said he wants the United States to be a leader in digital money by creating a strategic reserve of digital currencies. The announcement was met with a euphoric response from crypto advocates, but skeptics argue that it will expose US taxpayers to the huge price volatility of most digital currencies.

As Trump welcomes the top crypto movers and shakers to the White House for a summit on Friday, DW explores what the president might have in mind.

What do we know about Trump’s plan?

Trump posted Sunday on Truth Social that an executive order he signed in January on digital assets would create a stockpile or strategic reserve of cryptocurrencies, namely bitcoin, ether, XRP, solana and cardano.

“A U.S. Crypto Reserve will elevate this critical industry after years of corrupt attacks by the Biden Administration,” Trump wrote. “I will make sure the U.S. is the Crypto Capital of the World.”

No other details about the plan were revealed. 

Trump, who was once anti-crypto, is now a growing fan of alternative currencies. 

He first mooted the idea of a strategic stockpile at the Bitcoin 2024 Conference in Nashville, Tennessee, in July.

The concept has been proposed before. US public broadcaster NPR reported this week that one Republican senator introduced a bill last year to buy 1 million bitcoin as a federal stockpile. NPR said the Bitcoin Policy Institute had also proposed a similar plan for now-Treasury Secretary Scott Bessent in December.

US agencies currently hold 198.109 bitcoins, worth around $18.1 billion (€16.7 billion) as of Thursday, according to a tally by Arkham Intelligence.

Most of the holdings are the seized proceeds of crime, including drug trafficking, money laundering, and hacking. The government also holds millions of dollars of seized ethereum, tether and other smaller digital coins.

Bo Hines, the head of an interagency working group tasked with creating the stockpile, told the Wall Street Journal this week that their first job was to audit the US government’s existing cryptocurrency holdings.

What is a strategic reserve?

A strategic reserve is a stockpile of vital resources kept by governments or large organizations to provide a safety net during hard times. 

Examples include the US Strategic Petroleum Reserve, which helps ensure a regular supply of oil during crises, food reserves, including stockpiles of grain, to protect against hunger, and the stockpiling of vaccines by the US and European Union during the COVID-19 pandemic.

Countries also maintain monetary reserves, like foreign currencies or gold, to stabilize their economies and facilitate trade. The US government, for example, holds around 8,133 metric tons of gold, most of it at the United States Bullion Depository at Fort Knox, Kentucky.

Increasingly, reserves of critical minerals needed for technology, the energy transition and defense are also being established.

Will a crypto stockpile work?

Proponents say a crypto strategic reserve could help financial stability by diversifying US national reserves beyond traditional assets like gold and foreign currencies.

Such a stockpile would also help legitimize cryptocurrencies, encouraging more financial institutions to hold them. The likes of bitcoin are still viewed by many institutional investors with suspicion due to their price volatility and decentralization.

But some analysts are concerned about how Trump will fund the purchases when his administration is seeking tens of billions of dollars in public sector cuts, with help from Tesla CEO Elon Musk.

Bitcoin recently reached an all-time high of more than $109,000, a doubling in price since September, meaning any stockpile could be a costly purchase for the Trump administration. One million bitcoins would cost around $86 billion at today’s price.

“Based on the US carrying $36 trillion in debt, the only way we can see a Reserve being established is by a transfer of crypto held by the US government from proceeds of crime into a reserve, which amounts to no on-market buying,” Tony Sycamore, market analyst at IG, wrote on X on Monday.

Some skeptics think the value of the stockpile could vanish in a market crash. Others accuse Trump of favoritism toward a highly speculative investment, without providing clear strategic benefits for the nation.

Many of Trump’s backers are big crypto investors. Trump, himself, has a meme coin named after him.

Other critics point to the contradiction between creating a government stockpile of an asset that is deemed anti-establishment. Bitcoin was originally designed as a way to bypass government and central bank control.

Some crypto fans worry that if more governments begin stockpiling the likes of bitcoin, they could potentially start to manipulate the crypto market, just as they do with gold and currencies.

The gold price last month reached a record high of $2,956, much of it down to large purchases by Poland, Turkey, India and China.

Trump now faces significant legal and political hurdles before the stockpile becomes a reality as the idea still lacks congressional support and as large amounts of the crypto seized by US authorities once had legitimate owners.

Edited by: Uwe Hessler