President Donald Trump said Sunday the U.S. will create a “crypto strategic reserve” that includes major cryptocurrencies like bitcoin and ethereum—boosting crypto prices—the latest effort by Trump to court the cryptocurrency industry as he’s become a major crypto backer in recent months.

Key Facts

A national crypto reserve will “elevate this critical industry after years of corrupt attacks” Trump said, adding he directed his administration to “move forward on a Crypto Strategic Reserve” that includes cryptocurrencies XRP, solana and ADA.

He then added a second post saying the reserve will “obviously” include bitcoin and ethereum as the “heart of the Reserve,” saying he “loves” the top two cryptocurrencies.

Trump’s announcement Sunday builds on an executive order Trump issued Jan. 23 directing his administration to create a “working group” to propose a regulatory framework on digital assets, which includes evaluating a “national digital asset stockpile.”

What Was The Impact On Crypto Prices?

Bitcoin prices shot up more than 10% from around the time of Trump’s announcement to more than $94,000 early Sunday afternoon, while ethereum prices soared more than 13% from before the announcement to briefly top $2,500 in the early afternoon. Prices for the smaller market cap coins Trump mentioned—XRP, ADA and solana—all spiked at least 20% shortly after Trump’s announcement.

What Would A ‘crypto Strategic Reserve’ Look Like?

It’s still unclear what the final parameters of any crypto stockpile would look like, but Trump’s executive order suggests the reserve would be “potentially derived” from cryptocurrency the federal government has seized “through its law enforcement efforts.” The New York Times noted in January the federal government already has an estimated $19 billion in bitcoin that it’s seized, which it could simply hang on to in order to establish a stockpile. The government has previously periodically sold off its crypto holdings, The Washington Post notes, which has historically then driven down crypto prices, so any efforts to just hold onto that crypto and stockpile it would prevent that from happening. What remains to be seen is whether Trump will also try to acquire significant amounts of new cryptocurrency to stock the reserves, which would likely boost the crypto industry and existing crypto holders—but would also likely require congressional approval, the Times notes.

Chief Critic

While the cryptocurrency industry has cheered news of a national stockpile, some economists have raised concerns about the proposal. They point to cryptocurrency’s volatility, arguing the government purchasing cryptocurrency is a gamble that would primarily benefit existing crypto holders and could ultimately result in billions’ worth of taxpayer money getting wiped out, should the industry take a downturn. “There’s just no discernible logic to do it,” Mark Zandi, the chief economist at Moody’s Analytics, told the Post in November about a national stockpile. “I get why the crypto investor would love it. Other than the crypto investor, I don’t see the value, particularly if taxpayers have to ante up.”

Why Do Crypto Advocates Want A Stockpile?

In addition to boosting the industry through government purchases of crypto and preventing losses from any government sell-offs, cryptocurrency advocates believe a national stockpile would also help shrink the national debt by increasing federal revenue through the growing value of the government’s crypto investments. Sen. Cynthia Loomis, R-Wyo., introduced a bill in July to establish a national bitcoin stockpile in order to use the cryptocurrency as a government “savings technology” and way to “bolster America’s balance sheet,” claiming to the Post the effort would “cut the national debt in half.”

Tangent

One cryptocurrency that Trump’s Sunday announcement didn’t name is tether, which is pegged to the U.S. dollar, though the Post reports the U.S.’ seized cryptocurrency that could be used for a stockpile includes the stablecoin. That’s notable because Trump’s Commerce Secretary Howard Lutnick has ties to tether, with public reporting suggesting Cantor Fitzgerald, which Lutnick long led, helps oversee the cryptocurrency’s portfolio and recently struck a deal that could result in Cantor Fitzgerald getting a 5% ownership stake in tether. Lutnick has resigned from Cantor Fitzgerald and said he will divest from it as a result of his government role, but Democrats have criticized his company’s involvement with tether, with Sen. Elizabeth Warren, D-Mass., writing in a letter to Lutnick she has “serious concern[s]” about his involvement with tether and arguing his role as commerce secretary will put him “in a position to influence policies that may directly or indirectly impact Tether and the entire cryptocurrency industry.” The White House and Commerce Department have not responded to a request for comment about whether Lutnick would be involved with the Crypto Strategic Reserve.

Key Background

Trump became a major cheerleader for the crypto industry ahead of the November election, attracting significant fundraising support from top crypto figures as he announced a suite of friendly proposals that included tackling strict regulations, calling for all remaining bitcoin to be made in the U.S. and pushing for lower interest rates. The then-candidate also pledged to create a national stockpile for crypto, saying in July when he headlined the Bitcoin Conference, “For too long our government has violated the cardinal rule that every bitcoiner knows by heart: Never sell your bitcoin.” Trump even got into the cryptocurrency game himself, creating his own $TRUMP meme coin amid his inauguration. Trump’s Sunday announcement about the national stockpile comes after the president has already courted the crypto industry through other moves in office, creating the position of a “Special Advisor for AI and Crypto”—filled by former PayPal COO David Sacks—rescinding former Biden-era crypto guidance, establishing a working group to come up with how to regulate the crypto industry and appointing well-known crypto backer Paul Atkins to lead the Securities and Exchange Commission.

Forbes