New Order of Crypto Currency: The Trump administration's strategic ambitions and the future of the United States

Author: Stefanie Wayco, Matthew Catani

Compiled by: Vernacular Blockchain

President Donald Trump is moving towards implementing a crypto-friendly administration. A clear signal is the appointment of David Sacks as White House chief of artificial intelligence and cryptocurrency.

The appointment sparked widespread speculation about the role of “head of cryptocurrency”: how exactly would this role work? Will it have substantial policy-making power? Will it lead to a clearer regulatory framework? Was Sachs acting merely as an adviser without formal government title or authority? Or, will this role lead to the creation of a new government crypto asset reserve?

A U.S.-backed cryptocurrency reserve could bring much-needed clarity to this digital realm—for example, which government agency would be responsible for regulating cryptocurrencies—thus paving the way for the full integration of cryptocurrencies into our daily consumption and investments and boosting Application of blockchain technology in larger scale government projects.

As the most widely known digital asset, Bitcoin has always been regarded as the industry standard. Trump has publicly supported calls for a strategic Bitcoin reserve.

The new administration has the opportunity to usher in a new era that may be defined by innovation, digital credit, and the global acceptance of Bitcoin and other cryptocurrencies, whether they are considered securities or commodities.

1. Digital Asset Diplomacy: How the Federal Reserve Leverages

Cryptocurrency 1) The Role of the Federal Reserve

As the nation's central bank, the Federal Reserve manages monetary policy, controls inflation, regulates financial institutions, ensures payment systems operate efficiently, and promotes consumer protection.

The Fed's defining characteristic is its political independence, which allows it to focus on long-term economic stability. Part of its functions require working closely with other federal agencies, including the U.S. Department of the Treasury, the Securities and Exchange Commission (SEC), and the Federal Deposit Insurance Corporation (FDIC), to provide comprehensive oversight and stability.

For example, the Federal Reserve works with the Treasury Department to manage government debt issuance and liquidity in bond markets; works with the SEC to enhance the stability of financial markets; and coordinates with the FDIC to safeguard deposits and maintain the integrity of the banking system.

To achieve its goals, the Fed uses a variety of tools, including adjusting interest rates to affect borrowing costs, conducting open market operations by buying and selling Treasury securities, and setting reserve requirements to ensure banks maintain adequate liquidity.

2. The vision of cryptocurrency reserves

Trump’s proposed cryptocurrency reserve plan—whether its goal is to enhance financial stability, curb inflation, manage the national debt, or promote innovation—will require strategic cooperation, with the Federal Reserve being the institution best suited to lead the process.

Similar to its role in managing traditional assets, the Fed's involvement in a potential cryptocurrency reserve could determine its success, ensuring it is consistent with broader fiscal and monetary goals.

Additionally, the new administration’s embrace of cryptocurrencies also demonstrates confidence in the Federal Reserve’s ability to manage cryptocurrency reserves.

A national cryptocurrency reserve could conceptually serve as a strategic asset, similar to traditional reserve assets such as gold. Proponents argue that cryptocurrency reserves can reduce the national debt and free up dollars for other uses while positioning cryptocurrencies as long-term financial assets.

This reserve also serves as a stabilizing factor, providing reliability and credibility for the overall trust in cryptocurrencies, whether the digital asset is classified as a security, commodity, or currency.

2. Cryptocurrency as a commodity and a new gold standard 1) Historical

background and standards

Financial standards play a key role in economic stability and consumer trust. Historically, systems such as the gold standard provided a fixed framework for currency valuation, tying national currencies to specific amounts of gold.

Under the gold standard, currency is convertible into gold at a fixed exchange rate, which provides stability and predictability to financial markets and trade. Central banks maintain gold reserves and limit the money supply to a range proportional to these reserves, thereby promoting fiscal discipline.

Today, the U.S. government guarantees various securities through a so-called "total faith and credit" system, guaranteeing their reliability even without physical backing. This principle refers to the government's unconditional commitment to honor its debt obligations, thereby increasing confidence in government-issued securities.

For consumers, "comprehensive trust and credit" enables investments in financial instruments such as treasury bonds to be guaranteed by the government's tax collection ability or currency issuance ability, thus providing a safe and stable form of credit and investment.

From a policy perspective, “comprehensive trust and credit” facilitates efficient government financing through debt issuance. This system supports critical projects such as infrastructure construction and emergency relief plans, while ensuring access to capital markets.

In addition, it provides a foundation of trust in the broader financial system, supporting policies designed to promote economic growth and enhance economic resilience.

2. Cryptocurrency plans: Towards regulatory clarity

Wyoming Republican Senator Cynthia Lummis has been actively promoting the idea of ​​establishing a national Bitcoin reserve. [1] Her plan envisions the accumulation of 1 million Bitcoins within 20 years to combat inflation and supplement the role of the U.S. dollar.

The proposal includes converting Federal Reserve gold certificates into Bitcoin and establishing a strategic reserve with a 20-year minimum holding period.

A future cryptocurrency framework will need to address issues such as property rights, ownership protection, secure custody solutions, and most importantly, clarity on which agency is responsible for regulating cryptocurrencies and when and how they will be defined in light of the 1946 U.S. Supreme Court decision SEC v. Howey. For securities or commodities.

Loomis’ bill addresses these regulatory challenges by proposing a clearer distinction between securities and commodities to simplify compliance requirements for cryptocurrency businesses. The bill includes specific funding mechanisms and regulatory frameworks, and transfers the supervision of some crypto assets from the U.S. Securities and Exchange Commission (SEC) to the U.S. Commodity Futures Trading Commission (CFTC).

With the rise of cryptocurrencies, courts have debated the nature of certain digital assets as securities or commodities. This ambiguity has created a variety of different and confusing standards for the industry. [4] Therefore, a clearer overall regulatory framework for digital assets that can accommodate cryptocurrencies in a clear way is crucial.

While the Howey test will still apply, this 1946 test appears outdated for cryptocurrencies — something the courts at the time could not have foreseen.

While digital assets themselves are not necessarily securities, the new administration’s recognition of the entire crypto industry and its embrace of cryptocurrency reserves may push for the establishment of a new regulatory framework that clarifies the boundaries between securities and commodities.

Clearer legal standards and frameworks will enable companies to better operate trading platforms to offer cryptocurrencies; make institutional investments more compliant; enable consumers to buy, sell and use digital assets with confidence; and drive overall trust and acceptance of cryptocurrencies .

3. Using strategic petroleum reserves as a model

By managing the Strategic Petroleum Reserve (SPR), the U.S. Department of Energy demonstrates how government maintenance of commodity reserves affects markets and policy.

Although SPR mainly targets energy companies and indirectly affects a wide range of consumers, which is different from the cryptocurrency industry, its management model can serve as a basic model for building cryptocurrency reserves.

The SPR is used to stabilize oil prices, balance budget deficits and generate revenue while providing influence in global markets. Similar to the impact of the SPR on energy markets and inflation, cryptocurrency reserves may have similar effects on digital asset markets and monetary policy.

In day-to-day operations, the Department of Energy manages the SPR, but the President can issue directives for reserve releases. Congress can also authorize sales of oil in the SPR to fund government spending or to respond to emergencies and legislative needs, such as periodic sales to influence reserve levels.

Therefore, the SPR affects financial and monetary policies, including stabilizing oil prices, energy commodities, and inflation expectations.

Likewise, cryptocurrency reserves can stabilize cryptocurrency markets, combat economic instability, and drive global adoption of cryptocurrencies. Just like Congress authorizing SPR sales to fund government projects, legislative requirements could dictate the use of crypto reserves.

If the Bitcoin reserve is established, the Federal Reserve will play a role similar to the SPR, while the CFTC can manage the underlying assets like the Department of Energy and become a regulatory and governance agency.

The Federal Reserve will strategically influence crypto-related policy while managing and stabilizing the government’s crypto-asset funding. It also ensures that excess reserves are used to balance the budget and generate revenue, and protects the fundamental interests of consumers.

The Fed will also continue to set interest rates, lend money, and fund government programs while using cryptocurrencies as collateral.

Loomis’ bill states that the Treasury Department would play a role in managing and safeguarding Bitcoin reserves, just as the Treasury Department currently works with the Federal Reserve.

The proposal for a decentralized treasury system managed by the Treasury would provide secure storage for the nation’s cryptocurrency reserves, thereby resolving ownership and custody issues while ensuring transparency and accountability, in line with the growing public acceptance of full trust in cryptocurrencies.

3. The Way of Balance: Efficiency, Innovation and Development

The idea of ​​establishing a national cryptocurrency reserve reflects a transformative vision for the U.S. economy that combines traditional financial principles with emerging digital technologies.

However, the evolution of cryptocurrency policy marks a major shift away from Bitcoin’s original decentralized vision toward a more regulated, government-integrated future.

1. Challenge and balance

The current challenge is to balance its historical philosophy of decentralization while maintaining efficiency for consumers to use, invest, and innovate with digital assets. Although decentralization is at the core of the industry, its rapid development has reached a point where a degree of regulation and limited government intervention is required to provide clear legal standards and consumer protection mechanisms. This need is particularly necessary under the new government’s “Total Trust in Cryptocurrency” policy.

To develop, the “rules of the game” must be developed so that everyone can compete within the same framework.

By embracing cryptocurrencies, the new government has the potential to develop a future characterized by innovation, stability and global leadership in digital assets. Whether through federal programs, state-level efforts, or regulatory reform, the United States has the ability to carve out this new frontier with strategic vision and adaptability.

2. Continued uncertainty and global competition

Congressional concerns about economic stability and inflation make getting approval challenging, while public skepticism and regulatory uncertainty could hamper progress. Whether the new administration can find the right regulatory balance between efficiency and innovation will determine the success of the national cryptocurrency reserve and the U.S. crypto industry as a whole.

It is worth noting that as other countries develop cryptocurrency policies, the United States risks falling behind if it does not take proactive measures. Establishing a cryptocurrency reserve and implementing supportive regulations can solidify the United States’ leadership in the global crypto economy and drive innovation and investment.

3. American standards and global leadership

The United States has always been known for its high standards of consumer protection, data security and financial transaction rules, and is also a leader in the capital market.

Therefore, if other countries lead in this area, the United States may face the risk of unstable policies and insufficient protection of digital assets. In order to solidify its position as the global cryptocurrency capital, the United States should lead the industry with a "total trust in cryptocurrency" attitude.

Note: Stefanie Wayco is a partner, Matthew Catania is a senior associate, and Gregory Bailey is an associate at Duane Morris LLP .

The views expressed in this article are solely those of the author and do not represent the positions of his employer, clients, or Portfolio Media Inc. or any of its affiliates. This article is for general information purposes only and should not be construed as legal advice.