Trump's Commerce Secretary joins hands with Tether, and the US Bitcoin strategic reserve begins to take shape

After the dream linkage between encryption and traditional finance, can 1 million BTC digest 36 trillion US debts?

Author: Wenser

Original: Odaily Odaily

The latest news is that Howard Lutnick, the Commerce Secretary nominated by President-elect Trump, is in talks with Tether, the world's largest stablecoin operator. The two sides plan to launch a project to "provide US dollar loans to customers using Bitcoin as collateral" with an initial capital of US$2 billion. According to insiders, Lutnick's financial services company Cantor Fitzgerald is seeking funding from Tether, and the final scale of the project may reach tens of billions of dollars.

According to previous news , more than half of Tether's stablecoin reserves (about 39.2 billion US dollars) are managed by Cantor Fitzgerald. As a well-known bond trader on Wall Street and one of the 25 primary dealers of U.S. Treasury bonds that can trade directly with the Federal Reserve, the company earns tens of millions of dollars in profits each year.

At the same time, the total U.S. national debt has hit a new record high, exceeding 36 trillion U.S. dollars . Combined with Trump’s previous remarks such as "establishing a strategic Bitcoin reserve to solve the U.S. national debt crisis", market participants believe that this move may mean that the U.S.’s Bitcoin strategic reserve action is about to begin.

Odaily Odaily will provide an in-depth interpretation of the historical information, current situation analysis, challenges faced and subsequent impacts related to the US Bitcoin strategic reserve in this article for readers' reference.

Dreaming back to the beginning of “Bitcoin Strategic Reserve”: campaign manifesto or policy plan?

Looking back, the “Bitcoin Strategic Reserve” was first mentioned around July of this year.

In early July, German MP Joana Cotar strongly criticized the government's move to sell a large number of Bitcoins, saying that the German government should reconsider this strategy and compare it with "the US discussion of using Bitcoin as a strategic reserve currency." Everyone knows the rest of the story. According to the recent high price of Bitcoin, the German government's missed profits from "selling" Bitcoin have expanded to $2.03 billion .

In late July, Ari Paul, founder and CIO of BlockTower Capital, said that the news that the U.S. government plans to hold Bitcoin as its strategic reserve may be "bullish" on its price, but it is unrealistic to achieve this goal in the short term. He believes that "while the next president may say that they 'don't plan to sell' any Bitcoin currently held by the government, this does not mean that they are actually 'building a strategic reserve of Bitcoin.'" This was also the mainstream view of the market at the time. Many people believed that Trump was more trying to express a "crypto-friendly attitude" to win the votes of crypto voters, rather than really building a strategic reserve of Bitcoin.

But soon, the situation was reversed - Trump's clear remarks at the Nashville Bitcoin Conference at the end of July severely slapped many market participants in the face.

Quoting from the article "Full Text of Trump's Speech at Bitcoin Conference: Will Establish a Strategic Reserve of Bitcoin and Fire Gary Gensler" :

If cryptocurrency is going to define the future, I want it mined, minted, and produced in the United States, and nowhere else. If Bitcoin is going to go "To Da Moon" as we say, I want America to lead the way..... I'm proud to be the first major party candidate in American history to accept Bitcoin and cryptocurrency donations.

Bitcoin stands for freedom, sovereignty, and independence from government coercion and control. The Biden-Harris Administration's clampdown on cryptocurrencies and Bitcoin is wrong and very bad for our country. We will keep every Bitcoin job in the United States. That's what we're going to do. As soon as I take office, I will immediately establish a Presidential Advisory Commission on Bitcoin and Cryptocurrency.

Bitcoin does not threaten the dollar. It is the actions of the current U.S. government that are the real threat to the dollar. The danger to our financial future does not come from cryptocurrency, it comes from Washington, D.C. It comes from trillions of dollars in waste, rampant inflation, and open borders, and welfare and free health care for the millions of illegal immigrants that have flooded into our country. The ridiculous waste of trillions of dollars approved by our opponents has led to the inflationary disaster that Bitcoin supporters have been predicting. The value of every dollar has been quickly wiped out by 20%, 30%, even 40%. You understand this, but many others do not. The life savings of millions of Americans have been quickly destroyed. Runaway inflation is a stealth tax on the middle class. It is. It is a stealth tax. I call it the "Biden Tax."

With its low energy costs, the United States will become a world-recognized Bitcoin mining powerhouse.

The federal government owns nearly 210,000 bitcoins, or 1% of the total supply. But our government has long violated a cardinal rule that every bitcoin enthusiast knows: "Hold, don't sell." Right? How can I understand this? Never sell your bitcoin.

The federal government owns nearly 210,000 bitcoins, or 1% of the total supply. If elected, my administration’s policy will be that the United States will retain 100% of all bitcoins currently held or acquired in the future, effectively as the core of a strategic national reserve of bitcoins. We will take steps to transform this vast treasure into a permanent national asset for the benefit of all Americans.

Now, after Trump's victory in the election, the Crypto Advisory Committee has been put on the agenda, and many crypto professionals have begun to contact the Trump administration; and the "Bitcoin National Strategic Reserve" that was previously confirmed by him naturally also concerns countless people in the crypto industry.

At the end of July, Senator Cynthia Lummis proposed the "Bitcoin Strategic Reserve Act of 2024" , calling for "the purchase of 200,000 bitcoins per year, reaching 1 million within five years", accounting for about 5% of the total supply of Bitcoin. The bill plans to use existing U.S. Treasury funds to purchase Bitcoin in an amount corresponding to the U.S. Treasury's gold allocation; in less than 48 hours, the U.S. senators related to the bill received more than 2,200 letters asking them to jointly initiate and support the "Bitcoin Strategic Reserve Act" proposed by Cynthia Lummis. Previously, Cynthia Lummis also said : "The U.S. national debt has reached 35 trillion U.S. dollars. The Bitcoin Strategic Reserve can stop this runaway train and help future generations repay the national debt."

In early August, Trump mentioned in an interview that Bitcoin could be used to repay the U.S. government's $35 trillion national debt and avoid an imminent debt crisis. His original words were: "Maybe we'll repay $35 trillion (of national debt) and give them a little cryptocurrency check, right? We'll give them a little Bitcoin and wipe out our $35 trillion."

It can be seen that Trump at that time had made preliminary plans for the "use" of the Bitcoin strategic reserve - using the rising price of Bitcoin to repay the massive debts accumulated over the past.

OKX CEO Star and MicroStrategy founder Michael Saylor also expressed their views on the United States' Bitcoin strategic reserve plan. The former believes that "every central bank will hold a large amount of Bitcoin reserves in the future"; the latter regards the Bitcoin strategic reserve as another "Louisiana Purchase moment" in the United States ( Odaily Note: Thomas Jefferson purchased the Louisiana Territory for US$15 million in 1803, almost doubling the size of the United States. This sentence means that the United States' Bitcoin strategic reserve will be an important step in the United States' fight for Bitcoin hegemony ), and infinitely elevated its historical significance.

After Trump won the US election in early November, Cynthia Lummis posted : "The future is ₿right" and "We will establish a strategic reserve of Bitcoin", with the iconic "Bitcoin until 100k laser eye avatar" as the accompanying picture. Considering that the price of Bitcoin is close to $100,000, it is undoubtedly prescient.

Based on the above information and Trump's approval of Musk's establishment of the DOGE government efficiency department, the US Bitcoin Strategic Reserve Plan is not only a campaign declaration for "vote-grabbing", but also a "policy plan" to ease the growing pressure of national debt and curb inflation. After all, the arrow is on the string and has to be fired.

There is no doubt that this move has been put on Trump’s policy agenda, and the next thing to consider is how to implement the Bitcoin strategic reserve?

The United States' strategic Bitcoin reserve is underway: is it being pushed forward secretly or openly?

According to the BITCOIN Act of 2024 , previously proposed by Senator Cynthia Lummis, the content of this bill is mainly defined as a “Bitcoin Purchase Plan”:

The plan is to purchase no more than 200,000 bitcoins per year for five years, totaling 1,000,000 bitcoins. This will account for about 5% of the total supply of bitcoins; the purchase process will be transparent and strategic to minimize disruption to the market; its goal is to ensure that the U.S. government can hold a large number of bitcoins in the next twenty years, providing the country with a long-term financial hedging tool.

The bill proposes to use existing funds from the Federal Reserve System and the Treasury Department to purchase Bitcoin. Specific methods include revaluing the Federal Reserve's gold certificates to reflect the market value of gold and using the difference to purchase Bitcoin. In addition, the bill also plans to reduce the Federal Reserve Bank's free surplus funds and use part of the saved funds for the Bitcoin purchase plan.

According to the bill, the Bitcoin purchased by the government will be held for at least 20 years. During this period, these Bitcoins cannot be sold, exchanged or auctioned unless used to repay national debt. After the initial holding period, no more than 10% of the reserves can be sold every two years. This rule is designed to ensure the long-term stability of Bitcoin reserves while providing some flexibility to cope with future economic needs.

On November 14, according to FOX News , Pennsylvania Republican Congressman Mike Cabell proposed the "Pennsylvania Bitcoin Strategic Reserve Act" (Odaily Odaily Note: It is worth noting that Pennsylvania is the first state to introduce legislation related to "allowing direct purchase of Bitcoin". The previous bill for personal transactions was the "Bitcoin Rights Act") , which will allow the state Treasury to allocate 10% of its approximately $7 billion in state funds to Bitcoin to help fight inflation and diversify its investments beyond traditional assets such as bonds and cash reserves. According to media reports , the bill aims to allow the state to invest 10% of certain funds, including general funds, rainy day funds, and national investment funds in Bitcoin. According to the state's 2023 Treasury Annual Investment Report, these funds manage a total of approximately $51 billion in assets, so a 10% allocation will represent approximately $5.1 billion in Bitcoin investment.

On November 17, Dennis Porter, CEO of the U.S. Bitcoin advocacy organization Satoshi Action Fund (SAF), published a statement saying that the organization has “open-sourced” its Strategic Bitcoin Reserve policy model , which states:

Inflation has seriously eroded the purchasing power of state finances and retirement funds in the United States, affecting the economic well-being of residents; although state governments cannot control the federal money supply and macroeconomic policies, they have a responsibility to protect the financial health of their states.

As an anti-inflation asset, Bitcoin's market value has soared to over $1 trillion in the past 16 years. It is being widely accepted as a currency and can also be regarded as an inflation hedge asset. The states mentioned in the bill should use Bitcoin to guard against inflation.

The state treasurer may invest public funds in Bitcoin from the following funds: 1) the state general fund; 2) the budget stabilization reserve fund; 3) the state investment fund; and 4) other state funds deemed appropriate by the legislature.

The funds invested in Bitcoin shall not exceed 10% of the total account funds.

The acquired digital assets should be held in one of the following ways: A. Directly held by the state treasurer using a secure custody solution; B. Held on behalf of the state by a qualified custodian; C. Held in the form of an exchange-traded product issued by a registered investment company; 4. If it does not increase the state's financial risk and complies with regulations, the treasurer may use digital assets for loans to obtain additional returns through rules.

Combined with the cooperation between Trump's nominee for Secretary of Commerce Howard Lutnick and Tether, we can briefly summarize the implementation of the US Bitcoin Strategic Reserve Plan as follows:

1. The U.S. government directly intervenes: using the funds of the Federal Reserve and the Treasury Department to conduct "large-scale market purchases". This method is the most radical and therefore relatively unlikely;

2. The US states will divide the process: Just as Pennsylvania has started the state finance fund investment boom, SAF is negotiating with 10 other states on the implementation of similar legislation, so the possibility is medium;

3. The U.S. government already has Bitcoin holdings + cooperative reserves in the cryptocurrency industry: This path can not only combine the U.S. government's existing holdings of more than 200,000 Bitcoins to lay the foundation for Bitcoin strategic reserves, but also set the tone for subsequent cryptocurrency-friendly regulation and industry development. It is a more likely path.

Nevertheless, Trump still faces some intuitive challenges if he wants to truly push for a strategic Bitcoin reserve to become a reality.

The boulder standing in the way of the “Bitcoin strategic reserve”: time, law and market

In short, the problems that need to be solved on the road to Bitcoin strategic reserves mainly include the following aspects:

Time cost: 100 days or longer?

Republican Senator Cynthia Lummis has said she hopes to push her own Bitcoin Reserve Act across the country within the first 100 days of President Trump’s term ( Odaily Odaily Note: Trump will officially take office on January 20, and the 100 days are approximately the end of April 2025 ).

Analyst PlanB shared his speculation on the trend of Bitcoin in the next few years in September this year. He mentioned:

In November, Trump wins the election, ending the Democratic Biden/Harris/Warren/Gensler crackdown on cryptocurrencies, and Bitcoin rises to $100,000... In April 2025, Trump and the United States will begin to build a strategic Bitcoin reserve, and the price of Bitcoin rises to $400,000; in May, other countries (except the EU) will join the competition, and the price of Bitcoin will rise to $500,000; July to December: FOMO pushes the price of Bitcoin to a record high of $1 million.

It is worth mentioning that the previous "Bitcoin Rights Act" was planned to be submitted to the Republican-led Senate for review in the next few weeks. If passed, it will be submitted to Wyoming Governor Josh Shapiro for signature. It will undoubtedly take longer to vote and implement it at the national level.

Legal obstacles: The power struggle between the US president and the Federal Reserve

There is no doubt that the previous "power struggle" between Trump and Federal Reserve Chairman Powell will also affect whether the Bitcoin strategic reserve plan can proceed smoothly. After all, as the "money bag of the United States", the Federal Reserve has an independent status.

The conflict between the two can even be traced back to Trump's last term, when Trump threatened that "if Powell decides not to cut interest rates, he will be demoted." In February of this year, Trump reiterated in an interview: "If I am re-elected in November, I will not appoint Jerome Powell as the chairman of the Federal Reserve." According to previous news , Powell's term as chairman of the Federal Reserve will also end in May 2026. After Trump won the election, according to the Wall Street Journal , if Trump tried to fire Federal Reserve Chairman Powell, Powell was ready for a legal fight.

Market barriers: widespread skepticism mixed with hope

Galaxy Digital CEO Mike Novogratz previously expressed his skepticism about President-elect Trump's idea of ​​establishing a strategic Bitcoin reserve for the United States. He did not believe that the US dollar needed the support of assets such as Bitcoin, but the United States should increase its Bitcoin reserves to show its commitment to becoming a technology-oriented country.

Jennifer J. Schulp, director of financial regulation research at the Cato Institute’s Center for Monetary and Financial Alternatives, also said : “This is still putting the government’s money at stake, and Bitcoin has not shown itself to be a particularly stable asset. The bill requires senators and congressmen to take a bigger leap of faith in its long-term viability, and they may not understand cryptocurrencies that well.”

Anthony Pompliano, founder and CEO of Professional Capital Management, said , "Trump's support for Bitcoin is enough to redefine the way the United States treats the cryptocurrency and digital asset markets. We have a president who is very supportive of Bitcoin and is committed to protecting the rights of Bitcoin users. This pioneering approach will change the White House's economic policy. Trump holds Bitcoin and intends to establish a strategic reserve for the United States. This is a flag." In addition, he predicted that the reserve will be completed within 100 days.

For more interpretations of the challenges, you can also refer to the Economic Daily’s previous analysis : "For Bitcoin to truly become a U.S. national reserve asset, it still needs to pass multiple "checkpoints"."

Of course, the opposition to the Bitcoin strategic reserve is not one-sided. Asset management giant VanEck has voted in favor. Previously, Matthew Sigel, head of digital asset research at VanEck, wrote : "VanEck supports the Bitcoin strategic reserve. No need to cite 'sources', we will announce it ourselves."

Regardless of when the dust settles on the U.S. action, the clarion call for a “national competition” for strategic Bitcoin reserves has already begun.

The Future of Bitcoin Strategic Reserves: A National “Crypto Arms Race”?

In early November, according to Bitcoin Magazine, German parliament member Joana Cotar said , “If the United States buys Bitcoin as a strategic reserve, then I think all European countries will have FOMO.”

Around November 12, Dennis Porter, founder of Satoshi Action Fund, said he had received calls from five countries regarding the issue of Bitcoin strategic reserves.

On November 16, asset manager and investor Anthony Pompliano said that the global Bitcoin "arms race" between sovereign states and governments has begun. In addition, he believes that "market participants believe that President-elect Trump will keep his campaign promise to establish a strategic reserve of Bitcoin, which is in the best interest of the United States to prevent being preempted by other countries. There is a global Bitcoin race going on. Whether you are a local, state or federal government official, you should find a way to put as much Bitcoin as possible on your balance sheet. It's not like gold, we can dig more out of the ground." He explained that the race to adopt Bitcoin is mainly driven by currency depreciation, noting that American residents have lost about 25% of their purchasing power in the past five years.

On November 18, Polish presidential candidate Sławomir Mentzen promised to adopt a Bitcoin strategic reserve if elected.

On November 19, Binance founder CZ published a post praising the speech of MicroStrategy founder Michael Saylor and mentioned: "A wonderful speech, worth listening to. Thank you for your support for Binance in the video. Countries will compete to print money to buy Bitcoin, namely the Bitcoin Strategic Reserve. No one wants to be the last one."

On November 21, macroeconomic expert Mark Moss, host of the Bitcoin podcast "The Mark Moss Show", said that Trump's positioning himself as the "Bitcoin President" may push the United States to adopt a strategic Bitcoin reserve, which will trigger a "game" and lead to "sovereign FOMO (fear of missing out)" in other countries . He mentioned that Senator Cynthia Lummis has proposed a bill to establish a strategic Bitcoin reserve and plans to increase the number of Bitcoins by 200,000 per year until the book holdings reach 1 million. Under Trump's leadership, this plan "is likely" to become a reality. "If the United States does this, the G7 and G20 countries will be affected... Other countries have begun to pay attention to this matter and started to buy Bitcoin, which has brought great upward momentum to the price of Bitcoin."

It can be seen that under the dual pressure of inflation and interest rate cuts facing the US dollar, Bitcoin has become a "solution" that is as highly anticipated as the former "Bretton Woods System", and this is also a game of "one step slow, all steps slow".

Conclusion: Bitcoin is not a goal but a means, and the way forward is to convert debt into cash

As of November 25, the crypto prediction market Polymarket, which had previously successfully predicted Trump's election as US president, had attracted $845,000 in bets for its guessing campaign that "Trump will establish a strategic reserve of Bitcoin within 100 days of taking office." The probability of this event is currently reported at 30%, which is about 30% lower than the high point after Trump's election on November 7, reflecting to some extent the market's cooling of expectations for this matter.

But at the end of the article, the author would like to emphasize again the essence of the strategic reserve of Bitcoin. It is not simply to hoard Bitcoin. Holding more Bitcoins is unlikely to have a short-term and rapid relief effect on the US national debt of 36 trillion. After all, just as "distant water cannot quench immediate thirst", "slow money cannot cure acute illness". However, once Bitcoin is included in the consideration of the "national fiscal level", and then "debt is converted into currency", that is, using the gradually rising cryptocurrency to repay medium- and long-term debts in stages, it may be a "good medicine" prepared by Trump and his cabinet members for the US economy.

As for the efficacy, whether it can cure the disease or make it more serious, it will take time to verify.

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