'No reason' for strategic Bitcoin reserve, says UTRGV professor

EDINBURG, Texas (ValleyCentral) — Last week, President Donald Trump signed an executive order establishing a strategic Bitcoin reserve and digital assets stockpile. To commemorate the signing, the President was joined by cabinet members and industry leaders in cryptocurrency at the first Digital Asset Summit at the White House.

On March 2, Trump posted to his social media site that his administration would establish a strategic crypto reserve, including the top five cryptocurrencies by market cap size. The announcement naming the coins to be included in a reserve caused a spike across the entire crypto market.

Tracking on livecoinwatch.com shows the value jumping by a whopping $74 billion the same day Trump posted the crypto reserve announcement. But by the time the executive order was signed and the summit held, those plans had changed significantly. That plan was altered to establish only a reserve of Bitcoin, while other digital assets would be consolidated into a "stockpile."

Crypto markets, particularly Bitcoin, fell shortly after the change was announced. Market tracking shows Bitcoin dropping nearly $40 billion between March 3, and the next day. Investors had hoped the government would take a more active role in acquiring Bitcoin. Raising demand, and the cryptocurrency's value.

“The new purchases are going to be only if they’re not adding to the deficit. Which means, it’s not going to happen,” said Finance Professor Damir Tokic, who teaches a class on cryptocurrency and blockchain at the University of Texas Rio Grande Valley.

During the meeting, the president said he, “promised to make America the Bitcoin superpower of the world, and the crypto capital of the planet, and we’re taking historic action to deliver on that promise.”

The order calls for the reserve to be funded with Bitcoin the government has already acquired through, what Trump described as, "civil law, and other various forms of law and including enforcement actions." Government officials have said the U.S. has acquired approximately 200,000 Bitcoins through asset forfeiture, but that number has yet to be verified.

The executive order directs all federal agencies to conduct an audit to find out how many Bitcoin they have, and transfer them to the Treasury Department. Trump said it would amount to a, "virtual Fort Knox for digital gold to be housed within the United States Treasury.”

Tokic said digital currencies shouldn't be viewed like other commodities the government keeps in reserve.

“There is no reason to hold Bitcoin in a reserve," he said. "You need wheat. You need oil. You need gold. Bitcoin is just a digital number, you know? So, it really has no value. Value is zero, right?”

President Trump has ordered the government to hold its Bitcoin reserves indefinitely and never put them back on the market.

Tokic said he views the Bitcoin reserve as the fulfillment of a campaign promise. But sees little reason to establish a reserve other than to prop up the Bitcoin market.

The American government, along with other countries that have Bitcoin holdings have sold off those assets in recent years.

"For example, when Germany seized the bitcoin and sold it to the market, the price drops, OK. So, if the U.S. dumps 200,000 bitcoin, the price will crash,” Tokic said.

Bitcoin was first introduced in a white paper published in 2008, in the wake of the global financial crisis. The first Bitcoin transaction happened a year later. Tokic said the coin was meant to act as a hedge against economic uncertainty. Most holders are convinced the dollar will eventually collapse — necessitating a decentralized digital currency that can be easily transferred across borders.

While reserve Bitcoin will not be sold or released to the market, the remaining cryptocurrencies that make up the digital assets stockpile are eligible to be sold, managed or invested.

A bill has also been introduced in the Texas legislature for the state to form its own crypto reserve. House Bill 4258 would give the Texas Comptroller the authority to invest up to $250 million from the state’s economic stabilization fund into “Bitcoin or other cryptocurrencies.” Counties and other municipal governments would also be allowed to have up to $10 million in crypto assets.