The potential of Bitcoin becoming part of a US sovereign wealth fund is gathering serious pace, following comments from David Sacks, Trump’s new Crypto Czar. Speaking with CNBC on Feb. 4, Sacks outlined his vision of the fund, including digital assets as part of a bigger economic strategy for growth and stability.
“It’s possible the Sovereign Wealth Fund could decide they want to make Bitcoin or digital assets part of its portfolio,” Sacks said.
He added that the call is for incoming Commerce Secretary Howard Lutnick since he’s CEO of Cantor Fitzgerald, a major player in traditional and digital finance. Sacks added:
“The item President Trump asked our working group on digital assets to study was whether it’s possible to create either a Bitcoin reserve or some sort of digital asset stockpile.”
Inside Trump’s US Sovereign Wealth Fund Initiative
According to reports, on Feb. 3, ‘President Donald Trump signed an ‘executive order directing the Secretary of the Treasury and the Secretary of Commerce to develop a plan for a sovereign wealth fund within 90 days. Per the White House, the fund will invest national assets valued at $5.7 trillion to:
– Grow the economy
– Reduce taxes
– Improve fiscal responsibility
Sovereign wealth funds are ‘state-owned investment portfolios holding stocks, bonds, real estate and alternative assets. Almost all countries are using them to secure their national wealth and further long term economic goals.
Today, 23 US states have their own sovereign wealth funds and control about $332 billion between them. If Bitcoin is included at the federal level, the US could be a leader among countries embracing mainstream digital asset adoption.
Can Bitcoin Become America’s Next Strategic Reserve Asset?
A government-backed Bitcoin reserve has been mentioned and the Trump administration is indeed considering it. They would be the second after El Salvador has already started integrating Bitcoin into their national reserves.
Benefits discussed and debated on holding Bitcoin as a reserve asset include:
- Inflation Hedge: Since it has a capped supply of 21 million coins, Bitcoin is considered to be free from monetary inflation.
- Global Liquidity: As a borderless, decentralized asset, Bitcoin offers high liquidity, and governments can mobilize funds in no time.
- Diversification: Unlike traditional assets, Bitcoin is independent from the US dollar and bond markets, a unique diversification tool.
However, critics warn that Bitcoin volatility makes the asset too risky for any national reserve. If it suddenly drops in price there could be huge losses if not well hedged.
Secretary of Commerce Howard Lutnick and Bitcoin’s Future
Since Howard Lutnick took over as head of the Department of Commerce, speculation has been rising on whether he will support Bitcoin’s inclusion in the sovereign wealth fund.
Lutnick, CEO of Cantor Fitzgerald, previously supported Bitcoin by comparing it to gold during the Bitcoin 2024 conference.
“Bitcoin is like gold and should be free trade everywhere in the world,” Lutnick said.
Cantor Fitzgerald also manages Tether’s reserves, further indicating Lutnick’s involvement in the digital asset space. Being part of the Trump administration, he can have an edge on how the US government integrates cryptocurrencies into official financial structures.
Expert Take: Is it Smart to Include Bitcoin in US Sovereign Wealth Fund?
The US entry into the Bitcoin economy also got comments from industry analysts in all sorts of lights. To prove that, when asked, Michael Saylor, Chairman of MicroStrategy, said:
“Bitcoin is the hardest form of money ever created. It’s only a matter of time before central banks and sovereign wealth funds adopt it.”
But economist Peter Schiff, a long-time Bitcoin critic, thinks the volatility and lack of intrinsic value makes it unsuitable for government reserves:
“Bitcoin is not a stable store of value. Governments need assets that don’t fluctuate 50% in a matter of months.”
Despite the debate, Bitcoin’s growing presence in global finance means governments can’t ignore it. If the US does a Bitcoin reserve, it could set a precedent for others to follow.
Conclusion
This could be the moment Bitcoin makes it to the US sovereign wealth fund-a total turn-around on how digital assets are looked upon at a national level. Full swing, Trump’s executive order makes the next 90 days extremely critical in determining if US will finally recognize Bitcoin as a Strategic Reserve Asset or not. While advocates see this as a step towards legitimizing digital assets, skeptics warn of volatility risks. Either way, this will shape Bitcoin’s place in global finance.
Stay updated with Deythere as we’re available around the clock, providing you with updated information about the state of the crypto world.
FAQs
1. What is a sovereign wealth fund?
A sovereign wealth ‘fund is a state-owned investment portfolio managing national assets such as stocks, bonds, real estate, and alternative investments to ‘support economic stability and growth.
2. Why is the Trump administration considering BTC to be part of the sovereign wealth fund?
The current administration sees BTC as a hedge against inflation, a store of value, and a diversification tool to boost US financial resilience.
3. What are the risks of having BTC in a sovereign wealth fund?
Financial risk due to volatility, regulatory uncertainty, and lack of mainstream institutional recognition; a big drop in price may affect the fund’s overall value.
4. Has any country used Bitcoin as a reserve asset?
Yes, El Salvador was the first to make Bitcoin legal tender and hold it as a national reserve. Others are looking into it.
5. What role does Commerce Secretary Howard Lutnick play in this?
Lutnick, as head of the Commerce Department, can affect how Bitcoin would be added to the sovereign wealth fund. Based on his answer you can guess he’ll be supportive.
Glossary of Terms
A Bitcoin reserve is defined as either the government or an institution that is said to hold Bitcoin for the purposes of assisting that institution with economic stability, hedging against inflation, or diversification of portfolios.
Sovereign wealth funds are defined as state-investing entities that hold assets for the well-being of the socioeconomic growths of the state hence they hold the power to purchase and invest in capital assets such as stocks and bonds and alternatives for the purpose of enriching economic growth and for financial stability.
Commerce Secretary: The top-number government official in the U.S. in charge of trade policies, economic growth initiatives, and all regulations on financial issues including digital assets.
Cantor Fitzgerald: A global financial services firm involved in investment banking, asset management, and trading, with an increasing participation in cryptocurrency markets.
Inflation Hedge: A contrived investment that hedges the capitalization of money on inflation in which scarce assets such as Bitcoin and gold are considered store-of-value assets.
Digital Asset Stockpile: A potential reserve of cryptocurrencies held by a government or finance institution for economic security, strategic investment, or diversification.
US Federal Reserve (Fed): Central banking institution of the United States responsible for monetary policies, interest rates, and financial regulations that influence the acceptance of Bitcoin as a national reserve.
References
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