[War & Business] The Hidden Side of Trump's 'Bitcoin as a Strategic Asset' Policy

US Moves to Dominate Coin Market and Curb Sanctions Evasion
Major Mining Companies Target Relocation to the US

Donald Trump, the President-elect of the United States, is giving a speech about his cryptocurrency policy at the 'Bitcoin 2024 Conference' held in Nashville, Tennessee, USA, on July 27 (local time). Photo by AP and Yonhap News

Following Donald Trump’s pledge to stockpile Bitcoin as a strategic asset of the United States and the introduction of related legislation, the cryptocurrency market is experiencing turmoil. Despite concerns that the dominance of the US dollar could weaken, the policy to designate Bitcoin as a strategic asset is rapidly advancing, centered around Trump and the Republican Party.

Trump’s policy on cryptocurrency has undergone a 180-degree change in just four years since his first term in office in 2021, when he called Bitcoin a "scam." In Trump’s cryptocurrency pledge, Bitcoin is no longer a scam but a new alternative asset that can significantly reduce US debt. The strategy is for the US government to purchase 200,000 Bitcoins annually over the next five years, totaling 1 million Bitcoins, and then sell them at appropriate levels when prices rise further to reduce US government debt.

Republican Senator Cynthia Lummis, who introduced the bill to designate Bitcoin as a strategic asset, emphasized, "It is advantageous to hold Bitcoin, which appreciates by 55% annually, as reserves instead of the dollar, which loses 2% of its value each year," adding, "Through strategic stockpiling of Bitcoin, US government debt can be halved by 2045."

However, simply reducing government debt does not appear to be the sole goal of the US government. It is interpreted that there is a hidden intention to seize cryptocurrency dominance following dollar hegemony. Countries that secure large amounts of Bitcoin, the foundation of the cryptocurrency market, will have strong market dominance in the future.

There is analysis that the US government may repeat its past precedent of dominating the global financial market through massive gold purchases. The US currently holds about 8,100 tons of gold, accounting for 25% of the world’s gold reserves, and dominates the global financial market with the dollar, which is linked to the value of gold. By the same principle, if the US government buys a massive amount of Bitcoin and makes cryptocurrencies linked to it the standard for international transactions, the US could hold not only dollar hegemony but also coin hegemony.

This is why many major powers regard Bitcoin as a resource that must be secured before rival countries. Russia initially banned cryptocurrency transactions early in the Ukraine war due to concerns about foreign currency outflows but later shifted to legalization. Since late July, it has legalized cryptocurrency mining operations for individuals and corporations and passed legislation approving the use of cryptocurrencies in foreign trade. China, which had previously classified Bitcoin and cryptocurrency transactions as illegal, is also easing regulations. Brazil and Poland are reviewing amendments to laws to include Bitcoin as part of their asset holdings, similar to the dollar and other foreign currencies.

Especially if the US completely dominates the coin market, it will become even more difficult for the US’s adversarial countries to use cryptocurrencies as a means to evade sanctions. Russia, which has seen a 20% increase in oil transactions using the yuan or cryptocurrencies after dollar payments were blocked following the Ukraine war, will find it difficult to avoid significant economic shocks. Countries under international sanctions like North Korea and Iran, as well as various armed groups in the Middle East, will also find money laundering much harder.

Ultimately, the new Trump administration’s cryptocurrency-friendly strategy is not merely an election ploy or an offhand remark by Trump but a national strategy aimed at securing hegemony. The South Korean government must not fall behind in these cryptocurrency strategies pursued by the US and other major powers.