The crypto market gives and takes: After President Trump’s plan for a national crypto reserve drew backlash from both Republicans and investors, the prices of digital tokens that would be involved soared higher — and then tumbled. Bitcoin was trading at about $83,800 early on Tuesday, down nearly $10,000 from a day ago.
The plan has spurred a lot of questions about how it would work and the risks that would be involved. Mr. Trump campaigned last summer on creating a federal Bitcoin stockpile and appointed the venture capitalist David Sacks as his crypto czar.
A bill proposed by Senator Cynthia Lummis, Republican of Wyoming, would direct the government to buy about 200,000 Bitcoin a year over five years, for a value of about $90 billion. Of course, the digital token’s prices would probably rise in anticipation of those federal purchases.
One unknown is whether Mr. Trump, in the face of divisions among Republican lawmakers on the idea of a reserve, would seek to test legal limits on his authority and create one unilaterally.
Would taxpayer money be involved? That prospect drew the most criticism. Some crypto executives have floated the idea of creating a specific tax to fund a reserve, such as taxing transactions involving the $27.6 trillion stablecoin market.
Considering the wild swings in digital currencies, the prospect of taxpayer money being used for what’s effectively a speculative investment has drawn real concern. There’s nothing strategic or sensible about this idea, said Eswar Prasad, an economist at Cornell University.
It would also mean the U.S. government would be playing the role of capital allocator, a notion Mr. Sacks himself criticized in a 2021 post that resurfaced after Mr. Trump’s proposal.
In theory, the government could use any profit from its crypto investing to pay down the nation’s $36 trillion in debt.
But skeptics say the most obvious winner is Mr. Trump, who has rolled out a crypto venture of his own that carries millions of dollars in tokens set to be included in the reserve. Others are the crypto executives, many of whom donated extensively to Mr. Trump’s re-election effort.
A lot. The curious lineup of tokens for the fund suggests that Mr. Trump is being advised by a fairly narrow group.
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