Emily Walker
Donald Trump’s proposal to create a national Bitcoin reserve has drawn significant backlash from economists, including former Treasury Secretary Larry Summers.
Summers, who oversaw the national gold reserves during the Clinton administration, labeled the idea “crazy” and noted its lack of a clear purpose in a recent interview.
Criticism of the Bitcoin Reserve Proposal
Summers expressed doubt regarding the initiative, arguing that while physical assets like gold and oil are logical reserves, Bitcoin, lacking intrinsic use, is a poor choice.
“There’s no substantial reason for this apart from pandering to campaign donors,” he suggested, indicating that the proposal might be driven more by political interests than economic necessity.
Initially introduced at a Bitcoin conference in July, Trump’s vision intends to form a strategic Bitcoin reserve to bolster the US economy and compete against geopolitical rivals.
The president-elect has raised alarms that if the US remains passive, countries such as China may dominate the cryptocurrency market. “If we don’t take action, China and others will,” he emphasized during a rally.
Supporting this move, Senator Cynthia Lummis has proposed a bill for the US government to acquire one million Bitcoin over five years, accounting for around 5% of the global supply.
This reserve, potentially worth nearly $100 billion, is being touted as a way to alleviate the national debt of approximately $36 trillion without increasing taxes and to fortify the dollar through diversification of national assets.
Support for Trump’s Cryptocurrency Initiative
Investor enthusiasm for Trump’s cryptocurrency strategy has contributed to a recent spike in Bitcoin’s price, which recently surpassed $100,000. Super Political Action Committees (PACs) connected to the cryptocurrency sector have invested millions into Trump’s campaign, enabling pro-crypto politicians to gain influence.
To influence crypto policy further, Trump announced the formation of a crypto advisory council that has attracted interest from executives of major cryptocurrency companies.
Additively, venture capitalist David Sacks has been appointed as the White House’s AI and crypto czar, responsible for outlining a legal structure for the growing industry.
Despite the apparent support, the idea of a national Bitcoin reserve raises concerns among skeptics. Critics like Peter Schiff, CEO of Euro Pacific Precious Metals, have highlighted the volatility of Bitcoin and the potential risks of utilizing taxpayer funds to invest in it.
Schiff warned that government engagement with Bitcoin could lead to a harmful pattern of constant purchasing, which might devalue the dollar over time.
“A reserve composed of something that cannot be sold and must be continually bought is essentially worthless,” Schiff commented on the social media platform X. He cautioned that sustaining the “illusion of value” in such a reserve might compel the government to keep buying, ultimately lowering the value of the dollar.
Currently, Bitcoin’s market price hovers around $97,933, showing a 1.5% decline within the last 24 hours.
Featured image from DALL-E, chart from TradingView.com