Trump’s bitcoin stockpile plan stirs debate

By Medha Singh and Lisa Pauline Mattackal

(Reuters) – “Never sell your bitcoin,” Donald Trump told an enthusiastic crowd at a cryptocurrency convention in Nashville, Tennessee, in late July.

The Republican presidential candidate’s speech was the latest step in his effort to woo cryptocurrency-focused voters ahead of the November election, as he offered a series of campaign promises including a plan for a statewide Bitcoin reserve.

“If elected, the policy of my administration will be to hold 100% of all Bitcoin that the United States government now holds or acquires in the future,” Trump said, adding that these funds would form the “core of a strategic national Bitcoin stockpile.”

Trump is not the only one to make such a suggestion. US Senator Cynthia Lummis has introduced a bill that would see the US government buy one million bitcoins, around 5% of the total supply, while independent candidate Robert F Kennedy Jr has suggested that the government stockpile four million bitcoins.

A strategic reserve could be one use for the vast amount of bitcoin held by the U.S. government, but the jury is still out on what it would be used for, whether it would be viable, or whether it would be welcomed by the broader crypto market.

The U.S. government holds about $11.1 billion worth of cryptocurrency, including 203,239 Bitcoin tokens, according to data firm Arkham Intelligence, which says the bulk came from criminal takeovers including the online marketplace Silk Road, which shut down in 2013.

At current levels, the U.S. holds about 1% of the global bitcoin supply — equivalent to about 19.7 million coins, according to Blockchain.com. Bitcoin’s total supply is capped at 21 million coins.

By comparison with large non-government investors, Michael Saylor’s Microstrategy holds about 226,500 bitcoin tokens, according to second-quarter results. BlackRock’s iShares Bitcoin Trust and Grayscale Bitcoin Trust hold 344,070 and 240,140 tokens, respectively, according to data site BitcoinTreasuries.

The government’s hoarding of Bitcoin could increase its price.

“It would have a positive impact on price. It had to because we’ve never seen a commodity with such limited supply, even if it’s digital, become a new reserve asset,” said Mark Connors, global head of macro at Onramp Bitcoin.

But such a reserve means fewer tokens for crypto investors to trade and could leave investors vulnerable if the government sells some of its reserves.

“RFK talked about owning 19% of Bitcoin, which is the same amount of gold supply. I don’t think a single Bitcoin user would be happy with that,” Connors added.

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Governments outside the US also hold large amounts of Bitcoin; China is the second-largest Bitcoin holder with 190,000 Bitcoins, according to BitcoinTreasuries.

‘THERE ARE MANY THINGS TO SOLVE’

While the possibility of a national Bitcoin reserve is uncertain, cryptocurrency watchers are considering what form it could take.

Connors suggested the Federal Reserve could manage reserves for the Treasury Department, as it does with gold. On the other hand, the stockpile could more closely resemble the Strategic Petroleum Reserve, over which both the president and Congress have varying amounts of control, said Frank Kelly, senior political strategist at asset manager DWS Group.

“There’s a lot to unpack and understand there,” Kelly said.

There’s also an irony that bothers many true Bitcoin believers: The digital asset, which was intended to be decentralized and free from government control, has become part of a government reserve.

Regardless of what happens to Bitcoin stocks, many market players are quite happy that the cryptocurrency has become a major campaign theme.

“There is a general consensus in the industry that there is much greater interest in digital assets from both sides,” said Raoul Mewawalla, CEO of Mawson Infrastructure Group, which operates data centers for bitcoin mining.

“It is expected to continue after November.”

(Reporting by Lisa Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char)