President Donald Trump's move to gauge creating a potential crypto stockpile leaves open questions on what it is and what happens next.
On Thursday, Trump issued an executive order titled "Strengthening American Leadership in Digital Financial Technology," which included a number of measures from creating a working group tasked with developing a federal regulatory framework and also looks to ban the use of a central bank digital currency. The working group would include top officials including the Treasury Secretary, Commerce Secretary and the chairs of the Securities and Exchange Commission and the Commodity Futures Trading Commission, among others.
One action that garnered attention was that the working group would "evaluate the potential creation and maintenance of a national digital asset stockpile."
That stockpile could come "from cryptocurrencies lawfully seized by the Federal Government through its law enforcement efforts," according to the executive order.
During his campaign, Trump made several promises to the crypto industry including establishing a crypto advisory council and said he would create a "strategic bitcoin stockpile." Meanwhile, lawmakers in Washington and at the state level have been gearing up for what they're calling a "strategic bitcoin reserve." Oklahoma, Texas, Pennsylvania and Ohio have all proposed similar bills aimed at building bitcoin reserves.
The word reserve versus stockpile has been interchanged over the past few months, but there are some key differences.
“From my understanding, a stockpile would mean that the government would hold onto the crypto they have accumulated from various cases whereas a reserve would ultimately be what the Treasury Department determines to purchase and hold," said Rebecca Rettig, chief legal officer at Jito Labs, in an interview with The Block.
How the Trump administration plans to move forward with a crypto stockpile is ambiguous.
"From a legal perspective, it's unclear if they can use seized assets as part of a reserve," Rettig added. "So I wonder if the language was to be able to hedge around how they were going to accumulate crypto, or if they were going to just use the digital assets that have already been seized."
The government holds a variety of crypto, most notably bitcoin, but also USDT, USDC and UNI, coming to a total of over $21 billion, according to Arkham Intelligence. The U.S. government is one of the largest entities in the world holding bitcoin, according to Bitcoin Treasuries.
"So there's a whole host of what they already hold, but unclear on what they would buy," Rettig said. "Obviously, there's been a lot of rumors about whether XRP will be included, or SOL or other things like that but I don't think we have any clarity on that yet."
Overall the purpose of a stockpile or a reserve is unclear, whether that be offsetting the deficit or growing confidence in a new asset class, Rettig added.
A reserve could require an act of Congress.
If there is a crypto stockpile, that would mean that the government is not buying crypto and are holding on to the crypto they have. For a reserve, the government can go out and buy crypto with U.S. Treasuries or another asset, which would take an act of Congress, said Ron Hammond, senior director of government relations at the Blockchain Association.
Trump's executive order is vague on purpose and does not mention what specific crypto a stockpile would hold, Hammond said.
"It's unclear if he were to choose a token or if there are other tokens he has in mind," Hammond said. "In my mind, this is purposely vague and that's just the theme of the EO [exeuctive order] as a whole."
Either way, provisions in Trump's executive order will take years, not weeks, investment bank TD Cowen said in a note on Friday. Trump's move to evaluate creating a stockpile could have knock-on effects.
"We remain dubious as Trump's priority is U.S. dollar, which could be at risk as a reserve currency if countries turn to Bitcoin," said TD Cowen's Washington Research Group, led by Jaret Seiberg on Friday.
If the Trump administration does decide to go the route of a strategic reserve, that could cause price pressure, said Jake Werrett, general counsel for dyDX Trading.
"The glaring problem with establishing a strategic reserve of any meaningful size is that any aggressive purchase strategy would trigger price pressure, and the United States would cause itself to overpay," Werrett said in an email. "Thoughtful implementation of a meaningful reserve would take place over many months, and maybe years, and would take advantage of assets seized or received in settlements."
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