From Bitcoin to Trumpcoin: currency of the US Government

Within a month Donald Trump will be inaugurated as the 47^th president of the United States.  His embracement of crypto will mean a potentially much  friendlier four years of policymaking than outgoing President Joe Biden's administration provided.

In this blog I will give in more detail what Trump’s vision is, what are the goals he may realise, what his proposals are, how the market reacted up till now but above all what are the critics and in how far can his plans be realised.  

Trump: from crypto opponent to crypto supporter

President-elect Trump was initially a crypto sceptic — who labelled crypto a scam three years ago  and criticised it for competing against  the US dollar.

Trump however fundamentally changed his mind. He started to embrace crypto during his campaign this year.  Thereby he positioned himself as a crypto champion. He sees the integration of cryptocurrencies as central to future economic growth in the US.

This change of tone has much to do with the support of the crypto industry. Trump’s campaign effectively engaged the cryptocurrency sector, raising millions through crypto donations, totalling around $245 million.

Further on this change cannot be seen apart from his own growing financial interest in crypto. Trump as well as many of Trump’s intended ministers themselves have crypto interests. In September, Trump and his sons started a crypto venture, World Liberty Financial, a platform for investors to borrow and lend using cryptocurrencies.

In some ways, this shift is reflective of the broader public warming to digital assets as a legitimate investment class, particularly with the SEC’s regulatory approval early this year of spot Bitcoin and spot ether ETFs. Bitcoin ETFs hit $ 100000 billion and more in 2024.

Trump’s vision

Trump’s government will take a dramatically different approach to crypto than the Biden Administration.

Trump recognises that digital assets and other innovations are crucial to “Making America Greater than Ever Before”.  He is openly supporting Bitcoin and sees for it  that the future of crypto and Bitcoin will be in the United States. Trump promised to make the US the crypto capital of the planet, by bringing in friendly regulators.

Republicans control both Congress and Senate

In addition to supporting Trump, during the last campaign the crypto industry spent millions of dollars supporting candidates for the Congress advocating for policies that could expand the Bitcoin-driven cryptocurrency sector.

This resulted in a Republican Trifecta, whereby next to the pro-crypto Trump Government, the Republicans also control both House of Representatives and Senate next year, fuelling hopes in the crypto sector for far more favourable regulations. This Republican majority means there is a real chance Republicans can enact a comprehensive crypto-friendly legislative regime. The digital asset agenda, will be a prominent feature of the House Financial Services Committee's legislative agenda.

With a pro-crypto Congress and supportive regulators, the U.S. could strengthen its lead and emerge as the world’s primary hub for decentralized finance.

Trump promises

During his campaign Trump made a lot of promises to the crypto industry if he would be elected. Thereby he has stated his intentions to implement policies to accelerate the growth and maturation of the crypto industry in the U.S.

Overall, Trump’s focused approach is characterized by strategic crypto-related appointments and indicated policies including crypto friendly crypto regulations and the creation of a strategic Bitcoin reserve. Trump further announced the creation of a Presidential Bitcoin Advisory Board and to lower the tax on crypto.

Pro crypto appointments

Donald Trump embraced the digital currency pledge to be a "crypto president" in a crypto-friendly administration. His pro-crypto policy is taking shape with the nominations of prominent crypto friendly persons to key positions in its government and in further administrations such as Crypto Council and SEC. The appointments aim to address regulatory clarity and may signal a potential shift to a more friendly regulatory environment under the Trump administration.  

Trump administration

Trump has selected a large number of candidates for his upcoming administration that are pro crypto supporters while most have their own crypto investment. Trump recently named Scott Bessent as his nominee for the Department of the Treasury. Trumps intended minister of finance leading the Treasury is also a great in favour of crypto currency. Elon Musk, the most prominent crypto investor of the past few years, has been named to become one of the most important advisors. He will spearhead the newly formed Department of Government Efficiency, in short “DOGE”, related to the by Musk “emblazoned” crypto currency Dogecoin.

Crypto Council

Donald Trump announced the establishment of a Crypto Council for his incoming administration. This newly formed Council is positioned as the Presidential Digital Asset Advisory Committee, and is a cornerstone of Trump’s vision for aligning crypto and AI policy to drive economic growth, foster innovation and regulatory clarity in the crypto sector, while bolstering US dominance in both segments. This indicates he intends to make both artificial intelligence and crypto a bigger part of his political and economic portfolio

The Crypto Council is aimed to create an environment where the crypto industry can flourish and remain a cornerstone of the US technological advancement. It will help strengthen relations between the US government and the crypto industry. The Crypto Council will guide the digital asset industry by ensuring leaders have the necessary resources to thrive.

Trump’s crypto policy team is already taking shape with the announcement of crypto friendly candidates. The nominations of pro-crypto and AI advisors underlines Trump’s commitment to an innovation friendly policy.

David Sachs: the White House AI and Cryptocurrency Czar

Former PayPal COO and vocal blockchain supporter David Sacks has been named by President-elect Trump to serve as “the White House AI and Cryptocurrency Czar”. Sacks will chair the Crypto Advisory Council. He will  guide crypto policy and will be tasked with developing a clear legal framework that provides the regulatory certainty the cryptocurrency industry has been requesting. That coordination role will be crucial, since a crypto legal framework would need extensive input from the SEC and the Commodity Futures Trading Commission.

Bo Hines

Trump’s recent announcements also include naming former college football player Bo Hines as the Executive Director of the newly formed Crypto Council. Hines is tasked with balancing innovation and consumer protection as he builds a regulatory framework for digital assets. Bo Hines, a Yale and Wake Forest Law School graduate, and a staunch supporter of blockchain technology will function as the head of the Council. He will work with and report to Trump crypto czar David Sacks to foster innovation and growth in the digital assets ecosystem, ensuring industry leaders have the resources they need to succeed so that the digital asset industry can flourish while maintaining regulatory control.

Sriram Krishan

To complement the crypto policy, Trump has also appointed Sriram Krishnan,  a former partner at the venture capital firm Andreessen Horowitz, as Senior Policy Advisor for Artificial Intelligence in the Crypto Council. Krishnan will spearhead AI strategy as part of the White House Office of Science and Technology Policy.

Working closely with David Sacks and Bo Hines, he will coordinate AI initiatives across federal agencies to ensure the US remains at the forefront of AI innovation, boosting both US AI and blockchain leadership.

Council of Economic Advisors: Stephan Miran

Trump has also appointed Stephan Miran, a former Treasury official and economist at Hudson Bay Capital Management, as the chairman of the Council of Economic Advisors, an agency which will advise Trump on domestic and international economic policy. Miran is a pro-Bitcoin advocate and advocate of regulatory reforms for the crypto industry, who aims to integrate blockchain and decentralized finance into the US economy. Miran has often publicly spoken about the need for leaner regulations in general, especially in the crypto sector.

He is expected to guide key economic policies, especially those tied to the rapidly growing cryptocurrency sector. According to Trump Miran's previous role as a Treasury official positions him uniquely to offer insights on potential regulations affecting the crypto industry. Miran’s appointment suggests that the second Trump presidency will be more willing to incorporate crypto into its broader economic vision.

SEC: Paul Atkins

Soon after his election Trump announced to fire US Securities and Exchange Commission (SEC) Chairman Gary Gensler, whom he blamed for the “regulation by enforcement” approach. Gary Gensler has already announced that he will be stepping down on January 20 at noon, on the same day that Trump will be inaugurated.

Donald Trump has appointed Washington attorney Paul Atkins and former SEC Commissioner as the new chair of the SEC, who is known as more crypto-friendly and has said he supports crypto innovation as a way to boost financial services competition. Atkins has been involved in crypto policy as co-chair of the Token Alliance, which works to "develop best practices for digital asset issuances and trading platforms."

Atkins is seen as a catalyst for a shift in the regulatory approach towards cryptocurrencies. He is anticipated to adopt a more lenient stance compared to Gary Gensler. His appointment may signal a lighter-touch regulatory approach. It is expected that Atkins may guide the agency toward clearer crypto guidelines to facilitate industry growth. Trump said Atkins was a “proven leader for common sense regulations.”

FIT 21 Act

Both nominations of Sacks and Atkins have called for regulators to be more accommodating of crypto companies, but neither appear to have taken a position on whether and under what circumstances crypto tokens should be considered securities, commodities or utilities - a core issue that will ultimately decide how the industry is regulated.

Last summer the House of Representatives has already approved the Financial Innovation and Technology for the 21st Century Act, called FIT21 ACT. There is a great chance that the new Senate will vote for this law that is whispered by the crypto industry,

FIT21 is designed in theory to place some basic regulatory structures on the crypto world and assign government bodies to manage the rules. This legislation could result in the establishment of the Commodity Futures Trading Commission (CFTC) -- and not the SEC -- as the lead regulator for crypto.

While the SEC will still play a role, the legislation gives more responsibility for regulating cryptocurrencies to the CFTC, which oversees futures markets for everything from “gold to pork bellies. It does so by excluding "investment contract assets" from the definition of federal securities – effectively narrowing the SEC's jurisdiction over digital assets. They want regulation in as much as they want their interpretation that crypto assets do not fall under the SEC and therefore are not regulated by the SEC.

More regulatory clarity

Trump’s election marks a shift towards more crypto-friendly regulation. The crypto industry hopes that, with Trump in the White House will finally get regulatory clarity,  clearing a way for further growth and expansion of the digital assets sector.

With Trump's return to the White House, investors are betting on the introduction of a more supportive pro-business regulatory environment and not overly prescriptive regulation for cryptocurrencies. The Trump government is expected to implement a deregulation wave thereby ease regulatory frameworks around crypto, and dismantling what he views as restrictive regulations, further weakening overly  supervision.

The financial interest of the new government could be another probate medicine against stricter regulation. Almost everybody in the Trump cabinet possess Bitcoins and is in favourite of Digital active. By the end of 2025 Trump supporters hope to see the passage of sweeping new legislation that finally modernizes the U.S. financial system to embrace crypto.

Strategic Bitcoin reserves

Trump even proposed integrating Bitcoin into the nation’s financial strategy. One of the Trump election promises, first unveiled in a speech in July, that most excites the industry and investors is the possibility of creating a national strategic Bitcoin reserve.

An idea that the US federal government should invest in Bitcoin as a store of value, that are immediately available and under control of the US monetary authorities. This by analogy with the gold and currency reserves that Central Banks keep as a monetary anchor to use during times of economic or financial instability. Trump promised to create a strategic national bitcoin reserve and predicted bitcoin could eclipse gold's $16 trillion market capitalization. This aligns with his view that the US should lead in digital finance.

At this stage there isn’t much detail on what a strategic reserve would look like. The strategic bitcoin reserve project is not clearly laid out and there is still much speculation on the matter, starting with the basic question of which authority would be responsible for managing it. Would it be the Federal Reserve? Or another institution?

Bitcoin Act 2024

The most concrete proposal so far is that of pro-crypto Republican Senator Cynthia Lummis, who introduced her Bitcoin Act of 2024 in the Senate,

that would make the strategic Bitcoin reserve a reality.

If passed, the legislation would have the Treasury and the Federal Reserve purchase 200,000 Bitcoins each year, for a period of five years. With a million tokens in total, this would represent 5% of the total circulating supply of the cryptocurrency, which is around 21 million.

The idea is that this reserve would serve as a hedge against the devaluation of the US dollar, to strengthen national balance sheets and support future debt issues. In a best-case scenario, it might even be used to help reduce the nation's $35 trillion debt load.

The reserve would subsequently be maintained for a minimum of 20 years, before any coins in reserve could be sold, swapped, auctioned "or otherwise disposed of for any purpose other than retiring outstanding Federal debt instruments. Doing so would make the US a crypto superpower, as Trump suggested.

Reactions on the crypto markets

Donald Trump’s election and particularly his plans to support cryptocurrencies, has taken Bitcoin to levels never seen before. The price of Bitcoin passed the historic  $100.000 mark for the first time on December 4 and even  surged over $108.000 late on Wednesday night. The Bitcoin rate was up more than 50% in the four weeks since Donald Trump's sweeping election victory.

Especially Trump’s announcement of the nomination of Paul Atkins as the new chairman of the Securities and Exchange Commission (SEC) was raising hope that the new administration would usher in softer crypto policies.

This resulted in a  Bitcoin market capitalisation exceeding $2 trillion, bigger than the economy of a country like Spain. The total value of the cryptocurrency market as a whole has also seen a remarkable surge due to the Republican take over. It has almost doubled in the past 12 months and now sits at just under $3.8 trillion. In 2013, the total crypto market cap was roughly $1bn.

Bitcoin has since fallen back below US$100.000. For the week that ended December 22, Bitcoin slid 8.6%, or about $10.500, to close at $95.645, amid mixed signals from the Federal Reserve who turned more cautious on the outlook for interest rate cuts in 2025.

Where is Bitcoin going during Trump’s  government?

An important question is: where is the Bitcoin going?

If all the Trump promises come through that would be very positive for the broader crypto market. A friendlier environment for digital assets might trigger business, financial institutions and retail investors to broaden exposure to cryptocurrency and decentralised technologies.

That could also be the start of a longword trend. Trump’s election has triggered a growing number of analysts to adjust their Bitcoin rate forecasts to a much more favourable level. According to them the topping of the $100,000 mark puts bitcoin price discovery into unchartered territory, that could fuel even further gains in the coming years taking Bitcoin towards the next stop of $125.000 to $150.000 in 2025, while others are putting their Bitcoin price prediction for 2025 at even $200,000.

Critics are raising alarm

Notwithstanding all these Trump promises the big question is: will Trump be successful in putting forth a lot of the proposals that he has proposed to the community. While there are a lot of optimists there are many issues that could hamper this crypto evolution and trigger investors to take a more cautious attitude.

1. Crypto currencies: difficult to classify

According to these critics it is difficult to classify the Bitcoin and other cryptos while its reputation is dubious. Criticus doubt it could be called money. It has no utility. Some look at it as economically useless. Some even called crypto “a scourge”.

First of all, Bitcoin is difficult to be classified as a means of payment. This given the large fluctuations and its great volatility. Over the last four years, Bitcoin has experienced significant volatility, with prices fluctuating dramatically due to economic events, market sentiment, and regulatory developments.

While Bitcoin hovered new record highs, it has experienced dramatic sell offs in the past. Between November 2001 and November 2022 its value fell by three quarters from an almost $60000 high to almost $15.000, when the industry was reeling from the collapse of the FTX exchange made clear. For a means of payment these fluctuations are not very helpful.

May be Bitcoin is rather an investment. But then without income streams such as dividend or interest. Moreover Bitcoin has no intrinsic value such as gold. Despite their growing appeal and the meteoric rise in value, cryptocurrencies are currently not viewed as viable investment options, considering their high volatility. It is called a very risky and speculative investment. Many critics  are therefore warning investors to remain cautious.

       B. Crypto currencies: danger of fraud, scams, money laundering etc.

Cryptocurrencies are often facing criticism of being used for illegal and criminal activities. Cryptocurrencies have a long history of being used for activities like scams, hacks, fraud, tax evasion, money laundering, drugs dealing, and illicit finance of terrorist and rogue states,

This all contrast to the name of the currency of freedom as is called by Robert F. Kennedy Junior, Trump’s intended Minister of Health. The question is: How protect investors and others via upcoming light crypto regulation in the US.

3. Strategic Bitcoin reserve: undermine Fed independence

Another controversial Trump plan is the creation of a strategic Bitcoin reserve. The usefulness of Bitcoin as an emergency resource is questionable, while the benefits to the US economy are hard to discern. According to critics Bitcoin in itself has no intrinsic value, compared to gold, so it is useless to be used as a reserve for the Central Bank.

Analysts are also divided on whether Trump could use executive powers to create the reserve, potentially via the treasury department. It is also highly questionable if the proposed FIT21 Bill would pass the Congress. Even within Trump’s Republic Party there is enough resistance

If the Trump administration need to fund Bitcoin purchases by issuing new Treasury debt, it would fear strong resistance from the US Fed. If the US Central Bank will be forced by the Trump politics to use Bitcoin reserves, it would be an evidence that the central bank will no longer an independent authority. That would be a threat for the US dollar.

Given its huge price swings and ongoing volatility it could end up threatening US financial security – instead of protecting it.

.“We are not allowed to own Bitcoin” Mr. Powell

            D. Combining crypto and AI under one policy umbrella: regulatory nightmare

Industry experts have also mixed opinions about Trump’s blending of cryptocurrency with broader economic policies, particularly under David Sacks, who oversees both AI and crypto initiatives. First of all critics question if the incoming Trump administration’s regulatory approach to crypto will handle the complex interplay of innovation, adoption, and oversight.

We should not forget that AI and crypto are both disruptive in ways governments don’t fully understand. They warned of the potential risks: one-size-fits-all regulation risks stifling both industries. They thereby emphasizes the need for clear strategies from the Crypto Council and nuanced regulations to facilitate innovation rather hindrance, to avoid stifling developments within both fields. Bold, targeted policies will be the key to unlocking their combined potential.

       E. Crypto integration into financial system: thread for financial stability

The spectacular growth of the Bitcoin market that is embraced by Trump, poses a big thread for the financial stability. Trump's crypto-enthusiastic administration and the new Congress may allow crypto to enmesh itself within the broader financial and banking system. 

Some critics believe they could even pose a risk to the country's financial system. If looser regulations help make cryptocurrencies more mainstream, they could become further integrated into the country's financial system, raising the prospect of increased crypto volatility and potentially even financial crises. If all the regulatory shackles are taken off crypto market participants, a wild, speculative frenzy in the crypto market might end badly, affecting the broader US economy.

Final remarks:  Trumpcoin Currency of the central power

But there is also a fundamental issue. There are those critics who in principle are against these Trump plans. According to them they conflict with some of the libertarian and anarchistic ideals of the Bitcoin community with which early 2009 the Bitcoin was launched. Aim was to create a digital currency banishing the human factor using algorithms, instead of politicians and central bankers.

The Bitcoin, once a currency of anarchists, but also the coin of the anti-establishment, is well on its way to become the currency of the central power. And that paradoxically all thanks to a crypto currency that was ever created as antidote for monetary manipulations of the government.