Cryptocurrencies promise to be at the heart of Donald Trump’s economic policy during his second term as American president. His most controversial proposal is undoubtedly the creation of a strategic reserve of Bitcoin (SBR). This would involve the United States purchasing large quantities of cryptocurrency over the coming years to hold as a reserve, as the country does. strategic oil reserve.
However, an even bigger idea is potentially at stake: a significant shift in the global economic order, in which new players and new forms of money will begin to play an ever-increasing role.
But a more likely first step would be to designate approximately 207,000 bitcoins already held by the United States as a reserve to be held by the United States Treasury. Any additional large purchases of Bitcoin would require a change in the law and approval from the U.S. Treasury, which currently opposes it.
As for whether Trump can keep his pledge, it’s unclear whether an SBR at the federal level would get the votes needed to pass through the House of Representatives, the lower house of the United States. However, there already exists 13 US states who are actively considering or have proposed legislation to create an SBR.
However, economically, one of the main arguments is that an SBR can serve as a hedge to protect a country’s wealth against inflation and currency devaluation. While typical currencies can be printed at will by central banks, causing their value to decrease, there is a fixed supply of Bitcoin (the number in circulation cannot exceed 21 million), potentially limiting its devaluation.
Advocates therefore argue that an SBR could act as a relatively safe store of wealth, in much the same way that gold reserves currently are. It is for this reason that Bitcoin has been labeled “digital gold”.
Another popular argument is that the monetary value of the SBR could appreciate quickly and therefore repay the United States. national debt. This is also a largely theoretical and untested argument, and the precise mechanisms remain unclear.
On the other hand, some analysts fear that an SBR could undermine confidence in the dollar, leading to financial instability. If bitcoin were widely adopted as the world’s reserve currency, for example, it could destabilize the dollar’s position as the world’s primary reserve currency.
Of course, such instability may be compounded by the historical situation of Bitcoin. price volatility. This saw, for example, its price rising from around US$3,800 (£3,126) in early 2019 to almost US$68,000 in November 2021. It then lost almost half its value at the end of January 2022, falling to around US$35,000. But today it exceeds $95,000.
However, beyond these concerns, the SBR highlights a more fundamental, epoch-defining shift already underway.
To understand this shift, it helps to put the rise of cryptocurrencies in context. The post-World War II order was initially structured around a dollar-dominated system – with the The US dollar is pegged to gold and a host of other currencies linked to the dollar. This brought stability and confidence in the value of the dollar.
The fixed rate system was abandoned in the 1970s, but American dominance was retained through the petrodollar system where the price of oil was fixed in dollars. The role of the dollar as a global currency reserve currency and the influence of the United States within international institutions such as the IMF and the World Bank has reinforced this domination.
But three overlapping trends have threatened to dislodge the dollar’s dominance over the past two decades. First, the rise of emerging economies like Brazil, Russia, India, China, South Africa and others (BRICS+) creates a more multipolar world system. This challenges the United States’ position as the sole superpower and reshapes the geopolitical landscape. While experiencing rapid economic growth, these countries have also increased their role as global leaders.
The second trend has been the decentralization of the financial system and the rise of “private money”, particularly in response to the global financial crisis of 2007-08. Private money refers to any token used as currency that is not backed or controlled by a sovereign or central bank. In this sense, cryptocurrencies – which operate independently of the traditional money supply mechanisms of central banks and the Treasury – are the archetype of private money.
Besides the shift toward private money, there is a third trend. This is where governments give significant control to private players such as crypto providers and exchanges (“infrastructural power”) with the aim of achieving public policy objectives using the financial tools and services provided by these actors. This is a big change from the old order where governments had more direct authority.
Reports Trump made crypto a priority signal the next step in this change. The balance of power is shifting away from states and toward the companies that hold cryptocurrencies, the exchanges on which cryptocurrencies are traded, and the owners of cryptocurrencies. exchange-traded cryptocurrency funds.
This could be a watershed moment. If the United States, another major economic power (like China), or a series of large emerging economies (like the rest of the BRICS) become blockholders of Bitcoin or other major cryptocurrencies, it could trigger the emergence of an “arms race” in cryptocurrency. » on a global scale. This would see country after country rushing to shore up their reserves.
The media is already reporting that other countryincluding Japan, Russia and China, are accumulating bitcoins ahead of a possible SBR announcement by the United States. And Trump even noted that it could repeal a controversial crypto accounting rule that would allow banks to hold more bitcoins.
These trends have the potential to reshape the global economic order, integrating private money and the infrastructural power of private actors into a domain traditionally dominated by major states and their national currencies.
Trump’s ambitions for an SBR will highlight the growing role of private money in the global economy. But these changes in the world order are already underway, whether the new president’s plans for bitcoin come to fruition or not.
The authors do not work for, consult, own shares in, or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their nomination university.
