Bitcoin
How the US Can Leverage Bitcoin as a “Trump Card” Against China
BEIJING, CHINA – NOVEMBER 9: Former President Donald Trump’s public endorsement of Bitcoin has… [+] has sparked conversations in DC political circles about leveraging the cryptocurrency as a strategic reserve asset. One way Bitcoin could advance U.S. strategic interests: countering the weaponization of gold by China and Russia.
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During the Cold War, the United States and the Soviet Union fought not with bullets but with technology. Nowhere was this competition more fierce than in the Space Race. The two global superpowers brought together the greatest engineering minds of the 21st century in a bid to secure supremacy in space exploration. By landing the first man on the moon in 1969, the United States won the Space Race—and ultimately the Cold War.
The lessons of the Space Race are especially relevant today in light of the emerging competition in a new domain: blockchain. And former President Donald Trump appears to be taking those lessons to heart.
In a Social Truth publish Last month, Trump warned of the dangers of letting China and Russia dominate the digital asset economy. To counter this threat, Trump said, “We want all the remaining Bitcoin
Bitcoin
to be made in the USA.” He expanded on these comments in a interview with Bloomberg last week, warning of the consequences the United States would suffer if it failed to win the new race for bitcoin hegemony. “If we don’t do this, China will take over,” Trump said. “I don’t want to be responsible for allowing another country to take over that sphere.”
Trump’s acceptance of bitcoin and recognition of its geopolitical importance are Supply conversations among policymakers about classifying bitcoin as a strategic reserve asset.
But what exactly is a strategic reserve asset? What would be the incentive to classify bitcoin as one? And how could the United States ultimately use this cryptocurrency to strengthen its position in the global financial system?
What is a strategic reserve asset?
A strategic reserve asset is a resource that a state accumulates to strengthen its defenses, stabilize its economy, or secure a competitive advantage over other states. Examples of strategic reserve assets include commodities such as gold, oil, agricultural products, and essential minerals. Countries often draw on these reserves in times of war, pandemic, natural disaster, economic crisis, or other national emergencies.
Understanding gold’s role as a currency of exchange between nation-states is critical to understanding the role bitcoin can play as a strategic reserve asset — and how it could give the United States an edge over its adversaries.
Ingots vs. Bits
Countries stockpile gold bullion before wars and during periods of global economic uncertainty. As a universally recognized store of value, gold acts as a hedge against inflation and an alternative to holding foreign currencies and other assets. The shiny metal gives central banks a greater degree of autonomy from the global financial system, which is dominated by the United States.
For this reason, China and Russia have lost billions of dollars in US Treasury bonds, while at the same time significantly increasing their gold reserves. Both China and Russia to hold approximately 2,300 tons of gold and are the bigger and second largest gold producer, respectively.
China and Russia’s gold rush is an attempt to reduce their dependence on the dollar as they attempt to build an alternative axis of power to the US-led world order. Gold is the strategic reserve asset that these states rely on to gain some measure of autonomy from the US financial system. And they will likely accumulate even more of it as part of their efforts to challenge the dollar’s hegemony.
But what if an alternative asset could mitigate China and Russia’s flight from the dollar to gold?
This is where bitcoin can play a key role.
Fighting China and Russia with Bitcoin
As a form of “digital gold” with the potential for higher returns for buyers, bitcoin is uniquely positioned to complement physical gold as a strategic reserve asset.
Like the shiny metal, bitcoin’s value derives from its scarcity and its emerging use cases as a store of value and inflation hedge. But bitcoin also has many qualities that arguably make it superior to gold. Bitcoin, for example, is easier to transport, more verifiable, and a more difficult form of money than gold itself, because it is scarcer and harder to mine.
The United States can use bitcoin’s unique properties as a form of digital gold to prevent China, Russia, and other competitors from leveraging its physical gold reserves to undermine the dominance of the U.S. dollar.
Designating bitcoin as a strategic reserve asset would be the starting gun in the “Bitcoin Space Race.” If the United States—the world’s richest country and home to global capital—starts accumulating bitcoin on its balance sheet, other countries would have powerful incentives to do the same. This would kick nation-state game theory into hyperdrive as sovereigns scramble to accumulate the scarcest monetary asset on planet Earth.
In fact, the United States could slow — and possibly even reverse — the flight to physical gold by starting a digital gold rush.
Matthew Pines, a national security researcher at the Bitcoin Policy Institute, wrote about this possibility in a recent article. report detailing bitcoin’s potential as an economic policy instrument.
“From a national security perspective, key decision-makers may see the fact that allowing bitcoin to monetize alongside (or outperform) gold would disproportionately benefit the U.S.,” Pines explained. “That is, while China and Russia double down on analog gold, the U.S. could counter with digital gold.”
A ‘trump card’ against the militarization of gold
Another way to think about it: US policymakers could use bitcoin as a check against the weaponization of physical gold. As a macro investor and financier, writer Luke Gromen explained: “China and Russia may try to leverage their gold reserves to counter the weaponization of the US dollar against them. But the US may now have a ‘trump card’ in bitcoin.”
“Trump card” is an apt analogy, given the former president’s endorsement of the world’s largest digital currency. Trump’s public statements have sparked renewed interest in bitcoin as a strategic reserve asset on Capitol Hill. To gauge the temperature of lawmakers on the matter, I reached out to House Majority Leader Tom Emmer to get his perspective on the potential merits of putting bitcoin on the nation’s balance sheet.
“As the United States continues to embrace the ‘ownership economy,’ diversifying our investments is a common-sense next step,” Emmer said. “We’ve been exploring this issue for years and look forward to continuing the conversation with President Trump when he is reelected in November.”
Representative Emmer joins President Trump, Senator Lummis, and a growing group of policymakers who recognize that bitcoin is more than a financial experiment; it is a tool for projecting U.S. economic power.
Whether the United States uses this tool to its full advantage will depend largely on the results at the polls in November.