Trump’s ‘cyber summit’ gives digital currency new credibility with prominent US role

US President Donald Trump’s inaugural “crypto summit” at the White House on Friday was characterised by many of his classic touches: breaking tradition, teasing potentially risky bets and offering up US government resources in a new and starkly different way.
Hours before it was due to start, Trump announced the signing of an executive order establishing a “Strategic Bitcoin Reserve and United States Digital Asset Stockpile”.
Analysts cautioned that this could place US assets in a highly volatile medium that many consider speculative.
“I will make sure the US is the Crypto Capital of the World,” Trump said earlier this week on social media, announcing that the reserve would involve five cryptocurrencies: bitcoin, ether, XRP, solana and cardano.
But the executive order largely focused on bitcoin.
“Bitcoin is often referred to as ‘digital gold’,” it read. “Just as it is in our country’s interest to thoughtfully manage national ownership and control of any other resource, our nation must harness, not limit, the power of digital assets for our prosperity.”
Unlike ordinary paper currency, cryptocurrency is not issued by a central government, instead operating on a decentralised digital network. As such, digital currencies have no intrinsic value or legislated status as legal tender and are only worth what buyers are willing to pay.
As outlined, the White House plans to create a centralised “Strategic Bitcoin Reserve” capitalised within 30 days with bitcoin seized from criminals by various federal agencies and administered by the Treasury Department.
The reserve would mirror other US stockpiles available in times of national shortages or emergency – oil, vaccines, chemical warfare antidotes and military spare parts.
Less clear is why such a reserve is needed.
Last summer, during his presidential campaign, Trump spoke about a US “stockpile”, which tend to hold assets long term.
But a January executive order, which set up a working group to “secure America’s position as the world’s leader in the digital asset economy”, referred to a reserve fund, potentially involving more active trading, unpredictable market swings and greater influence over global prices.
And the order announced on Friday straddled both approaches, saying that topping up the stockpile and reserve would be “budget neutral” and not impose “incremental costs” on US taxpayers.
The Treasury Department will outline within 60 days details on the account, investment approach and any required authorising legislation, it added.
Crypto supporters argue that a reserve would hedge against inflation and monetary instability, with profits helping to reduce the national debt.
Critics cite crypto’s widely fluctuating price, history of crashes and unproven role as a store of value that – should markets plunge – could saddle the government with billions of US dollars in additional debt.
Some 44 million Americans have invested in, traded or used a cryptocurrency, according to a Pew Research survey in October, which added that 63 per cent of Americans do not believe they are reliable or safe.
Because they are decentralised and largely untraceable, cryptocurrencies have played a high-profile role in money laundering, ransomware and other criminal schemes.
Depending on how events play out, analysts said that the Trump move could put China in a bind if crypto ultimately proves successful and the reserve prophetic, despite the scepticism of many mainstream economists.
The administration made little secret of its view. “There is a strategic advantage to being among the first nations to create a strategic bitcoin reserve,” the executive order said.
China banned crypto mining and trading in 2021 but has supported yuan stablecoins, a subset of cryptocurrency whose value is tied to an asset like the renminbi, which Beijing believes could eventually challenge the US dollar’s global primacy.
By some estimates, 99 per cent of stablecoins are now US dollar denominated.
“There’s more of a competitive dilemma for China, where they effectively banned any real development of cryptocurrency,” said Martin Chorzempa, senior fellow with the Peterson Institute for International Economics in Washington.
“The US shifting towards a much more positive stance on the crypto industry – in particular, stable coins that are almost all dollar-based – could make it harder for China to expand the use of the renminbi if more countries and more people in businesses around the world are using US dollar-backed legal stable coins.”
Should cryptocurrency find productive uses – so far it has largely been a speculative play – that could pressure Beijing to ease its ban. Analysts noted that this, in turn, could weaken its tight grip on outbound capital flows and open the door for more cybercrime.
Organised by the billionaire David Sacks, Trump’s “crypto tsar”, the summit on Friday will elevate crypto’s profile and respectability. By hosting it at the White House, Trump signalled a major break with the wary policy of the former Biden administration which emphasised tight regulation and consumer protection.
Trump has already rewarded many major crypto magnates who donated millions of traditional and digital US dollars to his presidential campaign and inauguration committee seeking to reduce federal oversight and “regulatory meddling”.
The turnaround has been stark, prompting even some industry insiders to caution that the industry risks getting ahead of itself.
The strategic reserve idea is an “unforced error that will be regretted in the future”, said Anthony Pompliano, founder and chief executive of investment firm Professional Capital Management, in a blog post.
Trump himself has done a big U-turn in how he views crypto. In 2021, he slammed it as a “scam” and “potentially a disaster waiting to happen”.
Less than four years later, however, on the eve of his inauguration, Trump and his wife Melania announced their own memecoins – novelty digital currencies – that appeared to break traditional conflict-of-interest boundaries for a sitting president.
Trump’s memecoin, called $Trump, soared as high as US$75 on introduction for a market cap of US$14 billion, potentially handing the president hundreds of millions of US dollars.
This week, after Trump imposed tariffs on China, Mexico and Canada, it was trading at around US$13, a 75 per cent decline. Midday Friday, after the executive order was released, it was trading at around US$12.83, down around 1 per cent.
Trump and his three sons are also involved in World Liberty Financial, a start-up that sells its own token.
In advance of the summit, the US Securities and Exchange Commission ruled that meme coins are not considered securities and therefore not subject to its regulatory oversight.
Crypto is still partly regulated, however. State and federal agencies can enforce best practices involving money laundering, terrorism financing or deceptive advertising. But there is no overarching federal regulatory framework for digital assets.
In other turnarounds, the SEC late last month dropped its lawsuit, filed by the Biden administration, against cryptocurrency exchange Coinbase; announced a reform of its crypto policy; and planned for a new crypto task force to develop industry guidelines.
This followed the 2022 implosion of another exchange, FTX, that had donated extensively to lawmakers.
FTX founder Sam Bankman-Fried is serving a 25-year prison term for defrauding clients and investors.
It was not immediately clear how the stockpile and reserve would coexist, including what other types of currencies might be involved and what the exact purpose of the funds would be. Bitcoin was trading at US$87,675 midday Friday, down 2.5 per cent.
One approach, proposed in a bill last year by Senator Cynthia Lummis, Republican of Wyoming, would have Washington purchase 5 per cent of the 21 million outstanding bitcoin – the most well-established cryptocurrency – and hold it at least 20 years.
The government’s stash of seized bitcoin – which, the order noted, “has never been hacked” – stands at 200,000, valued at around US$17.5 billion.
Crypto’s major political action committees ploughed some US$130 million into the 2024 congressional races. According to a group called Stand With Crypto, 274 pro-crypto candidates were elected to the House of Representatives and 20 to the Senate in November.
“Crypto-related groups spent something like half of the industry money from all industries, which is really extraordinary,” said Chorzempa. “[Trump’s] turnaround could not be more stark, saying he doesn’t like them because their value is based on nothing, to then issuing his own family meme coin.”