Trump Administration's Bitcoin Reserve Blueprint: Could It Open a New Paradigm for Future Finance?

Original Title: The Blueprint For A National Bitcoin Reserve

Original Authors: Stefanie Wayco, Matthew Catani

Original Translation: Baihua Blockchain

1. Policies of the Trump Administration

1) The Trump administration is moving towards crypto-friendly policies.

U.S. President Donald Trump is gradually pushing for the establishment of a government that supports cryptocurrencies. One clear signal is his appointment of David Sacks as the White House Commissioner for Artificial Intelligence and Cryptocurrency Affairs.

This appointment has sparked widespread speculation: how will the so-called "Commissioner for Cryptocurrency Affairs" operate? Does this position have real policymaking power? Will it promote a clearer regulatory framework? Is Sacks merely an advisor without formal government duties and authority? Will this role facilitate a new national-level cryptocurrency reserve mechanism, allowing the government to hold and protect digital assets?

2) National-level cryptocurrency reserves: Promoting the integration of regulation and blockchain technology.

If the U.S. supports the establishment of an official cryptocurrency reserve, it could bring much-needed policy clarity to the current digital asset space, such as clarifying which government agency regulates cryptocurrencies. This would not only help promote the full integration of cryptocurrencies into daily payments and investments but also facilitate the application of blockchain technology in large government projects.

As the most widely recognized digital asset, Bitcoin has long been seen as the industry standard, and Trump has publicly supported calls for the establishment of a strategic Bitcoin reserve.

Under new government leadership, the U.S. has the opportunity to lead a wave of innovative transformation, ushering in a new era centered on digital credit and global acceptance—not limited to Bitcoin, but encompassing the entire cryptocurrency ecosystem, regardless of whether they are defined as securities or commodities.

2. Digital Asset Diplomacy: How the Federal Reserve Can Utilize Cryptocurrency

1) The Role of the Federal Reserve

As the central bank of the United States, the Federal Reserve is responsible for managing monetary policy, controlling inflation, regulating financial institutions, ensuring the efficient operation of payment systems, and protecting consumer rights.

The core feature of the Federal Reserve is its political independence, which allows it to focus on long-term economic stability. At the same time, it must work closely with other federal agencies, such as the U.S. Treasury, the Securities and Exchange Commission (SEC), and the Federal Deposit Insurance Corporation (FDIC), to provide comprehensive regulation and financial stability.

For example, the Federal Reserve collaborates with the Treasury to manage government debt issuance and bond market liquidity, works with the SEC to maintain stability in financial markets, and partners with the FDIC to ensure deposit safety and maintain the integrity of the banking system.

To achieve these goals, the Federal Reserve employs various policy tools, including adjusting interest rates to influence borrowing costs, buying and selling government bonds through open market operations to regulate market liquidity, and setting reserve requirements to ensure banks maintain sufficient liquidity.

In addition, the Federal Reserve is responsible for overseeing the core components of the national payment and settlement system, including electronic payment processing and money supply management. Whether the Federal Reserve will further engage in the cryptocurrency space as part of U.S. financial policy in the future remains to be seen.

2) The Vision for Cryptocurrency Reserves

The cryptocurrency reserve plan proposed by Trump—whether to enhance financial stability, curb inflation, manage national debt, or promote innovation—requires strategic collaboration, and the Federal Reserve is undoubtedly the most suitable institution to lead this process.

Just as it plays a role in traditional asset management, if the Federal Reserve can participate in the management of cryptocurrency reserves, it can ensure that the plan aligns with overall fiscal and monetary policy goals and directly influence its success or failure.

Moreover, the new administration's acceptance of cryptocurrencies reflects its confidence in the Federal Reserve's ability to effectively manage cryptocurrency reserves.

National-level cryptocurrency reserves can be viewed as a strategic financial tool similar to traditional reserve assets like gold. Proponents argue that establishing cryptocurrency reserves helps reduce national debt, release more dollar liquidity, and establish cryptocurrencies as long-term financial assets.

Regardless of whether crypto assets are classified as securities, commodities, or currencies, such a reserve mechanism could become a stabilizing factor in the market and enhance the credibility and trustworthiness of cryptocurrencies, elevating their status within the financial system.

3. Cryptocurrency: A New Type of Commodity and the "Digital Gold" Standard

1) Historical Background and Standards of the Financial System

Financial standards play a crucial role in economic stability and consumer trust. Historically, the gold standard provided a fixed monetary value framework, anchoring the value of national currencies to a specific quantity of gold.

Under the gold standard, currencies could be exchanged for gold at fixed rates, providing stability and predictability for financial markets and international trade. Central banks maintained fiscal discipline by holding gold reserves and restricting the money supply to match the scale of their gold reserves.

Today, the U.S. government guarantees various securities through the "full faith and credit" system, ensuring asset reliability even without physical backing. This principle means that the government unconditionally guarantees the fulfillment of its debts, thereby enhancing market confidence in government-issued securities.

For investors, the government credit guarantee makes investment instruments like U.S. Treasury bonds safer and more reliable, as these debts rely on the government's taxing power or ability to issue currency, providing a stable credit system for the market.

From a policy perspective, the national credit system enables the government to efficiently raise funds through debt financing to support critical national projects such as infrastructure development and emergency relief programs. It also serves as the cornerstone of broader financial system trust, underpinning policies that promote economic growth and resilience.

If cryptocurrencies can gain more formal recognition within this framework, they may become a new type of strategic reserve asset following gold and government bonds, potentially pushing the global financial system into the "digital gold" era.

2) The Cryptocurrency Plan: Moving Towards a Clear Regulatory Framework

Senator Cynthia Lummis of Wyoming has been advocating for the establishment of a national Bitcoin reserve, envisioning the accumulation of 1 million Bitcoins over 20 years to hedge against inflation and serve as a supplementary asset to the dollar.

This proposal includes converting the Federal Reserve's gold certificates into Bitcoin and establishing strategic reserves that must be held for at least 20 years.

The future regulatory framework for cryptocurrencies must address the following key issues:

• Property rights and ownership protection

• Secure custody solutions

• Which agency regulates cryptocurrencies

• When and how to determine based on the 1946 U.S. Supreme Court case SEC v. Howey whether they should be classified as securities or commodities

Lummis's proposed "Cryptocurrency Regulatory Act" aims to address these regulatory challenges and clearly distinguish between securities and commodities to simplify compliance processes for cryptocurrency businesses. The bill also outlines specific funding support mechanisms and regulatory frameworks, planning to transfer some regulatory authority over crypto assets from the SEC to the Commodity Futures Trading Commission (CFTC).

As the cryptocurrency market rapidly evolves, courts face challenges in determining whether certain digital assets are securities or commodities. Current legal standards still contain many gray areas, making it difficult for the industry to adhere to unified regulatory standards. Therefore, a clearer and more comprehensive regulatory framework is crucial.

The Howey test remains applicable, but this law established in 1946 is no longer fully applicable to cryptocurrencies, as courts at that time could not foresee the emergence of digital assets.

While digital assets themselves are not equivalent to securities, if the new administration fully promotes the development of the crypto industry and embraces cryptocurrency reserves, establishing a new regulatory framework to clarify the boundaries between securities and commodities may become a reality.

Clearer legal standards and regulatory frameworks will help businesses operate cryptocurrency trading platforms more effectively, make it easier for institutional investors to participate in the market, allow consumers to buy, sell, and use digital assets without worry, and continuously enhance market confidence and trust in cryptocurrencies.

3) The Strategic Petroleum Reserve Model: Lessons for Cryptocurrency Reserves

The U.S. Department of Energy (DOE) demonstrates how government management of commodity reserves, such as the Strategic Petroleum Reserve (SPR), can influence markets and policies.

Although the SPR primarily targets the energy sector and indirectly affects a broad range of consumers, which differs from the cryptocurrency industry, it can still serve as a foundational model for establishing cryptocurrency reserves.

The core functions of the SPR include:

• Stabilizing oil prices and preventing market volatility

• Compensating for fiscal deficits and providing financial leverage for the government

• Enhancing global market influence and providing strategic advantages in international energy dynamics

Similar to the role of the SPR in energy markets and inflation control, cryptocurrency reserves could also influence the digital asset market and even become a monetary policy tool.

In the management mechanism of the SPR, the DOE is responsible for daily operations, but the President has the authority to order the use of reserves, and Congress can authorize the sale of SPR crude oil to support government spending or respond to emergencies, such as legislatively mandated periodic sales to adjust reserve levels.

Therefore, the strategic petroleum reserve not only impacts financial and monetary policy but also directly affects energy markets, commodity prices, and inflation expectations.

Similarly, cryptocurrency reserves could:

• Stabilize the crypto market and reduce price volatility

• Hedge against economic instability and provide financial safe-haven tools

• Influence the global adoption rate of cryptocurrencies and enhance the U.S.'s dominant position in the digital asset market

How Congress authorizes SPR funds for government projects may also determine how cryptocurrency reserves are used in the future.

4. Bitcoin Reserves: A New Role for the Federal Reserve

If a national Bitcoin reserve is established, the Federal Reserve (Fed) would play a role in the crypto market similar to that of the SPR in the energy market, while the CFTC (Commodity Futures Trading Commission) could assume regulatory functions akin to those of the DOE, responsible for the execution and oversight of cryptocurrency reserves.

In this model, the Federal Reserve would not only be able to:

• Strategically formulate cryptocurrency-related policies

• Manage and stabilize government-held crypto assets

• Ensure sufficient reserve assets to meet fiscal needs and generate revenue

• Protect investor interests and ensure market stability

Moreover, the Federal Reserve would still retain its core functions, including:

• Setting interest rates to influence market liquidity

• Borrowing and fundraising to drive government projects

• Using cryptocurrencies as collateral to enhance fiscal flexibility

Lummis's proposed bill also emphasizes that the U.S. Treasury will play a key role in managing and protecting Bitcoin reserves, just as it currently collaborates with the Federal Reserve.

1) The Future of Decentralized Crypto Vaults

To enhance transparency and security, the government may adopt decentralized vault systems as a storage solution for national crypto reserves. The Treasury could:

• Manage and regulate the custody of crypto assets to ensure the safety of national reserves

• Establish custody mechanisms that comply with regulatory standards to prevent asset misuse

• Ensure reserves are publicly transparent, aligning with market trust in government asset management

This mechanism not only addresses ownership and custody issues but also enhances public confidence in cryptocurrencies, promoting societal recognition of "full faith in crypto."

2) The Balancing Act: Efficiency, Innovation, and Development

The concept of a national cryptocurrency reserve presents a vision for reshaping the U.S. economy—it integrates traditional financial principles with emerging digital technologies, driving the financial system towards modernization.

However, the evolution of cryptocurrency policy marks an important turning point, transitioning from Bitcoin's initial decentralized vision to a more regulated, government-led model.

The core challenge lies in how to balance the historical ideals of decentralization while ensuring users can efficiently and safely use, invest in, and innovate with digital assets.

Even though the industry still emphasizes decentralization, its development has reached a stage where regulation is urgently needed. In the face of ambiguous legal standards and the lack of consumer protection mechanisms, moderate government regulation and policy guidance have become inevitable. The new administration's trust and support for cryptocurrencies also signal that a policy framework is about to be implemented.

Establishing clear rules is crucial, as only with explicit rules can market participants compete fairly.

By embracing cryptocurrencies, the new administration is expected to promote a future centered on innovation, stability, and global leadership. Whether at the federal level, state government initiatives, or regulatory reforms, the U.S. stands at the crossroads of a new era for digital assets, and its strategic vision and adaptability will determine the future landscape of the industry.

3) The Balance of Regulation: Challenges and Opportunities in Policy Advancement

Congress's approval still faces resistance. Some lawmakers express concerns about economic stability and inflation, while ongoing regulatory uncertainty and public skepticism may hinder the implementation of cryptocurrency reserves.

The key task for the new government is to find a regulatory balance between efficiency and innovation. Only with appropriate oversight can national cryptocurrency reserves and the entire crypto industry thrive in the U.S.

It is worth noting that as other countries accelerate the implementation of cryptocurrency policies, the U.S. risks falling behind in global competition if it does not take proactive measures.

Establishing cryptocurrency reserves and introducing supportive regulations can not only solidify the U.S.'s leadership position in the global crypto economy but also drive growth in technological innovation and capital investment.

4) America's Responsibility: Building Confidence as a Global Crypto Capital Center

The U.S. has long been a leader in global capital markets, characterized by high standards of consumer protection, data security, and financial transaction rules.

If other countries take the lead in digital asset regulation while the U.S. fails to keep pace, the global market may be subject to more unstable policy influences. Therefore, the U.S. should clearly express its trust in cryptocurrencies (full faith in crypto) and adopt a stance as a global crypto economic center, formulating more robust policies.