by Brian Shilhavy
Editor, Health Impact News

One of Donald Trump’s campaign promises was to create a government “Crypto Reserve” where the U.S. Government would own cryptocurrency assets to be used to run the country.

Much of the talk was originally about the U.S. Government owning Bitcoin, but this past weekend Trump announced that it would include other cryptocurrencies as well.

The news originally sent cryptocurrency values higher, but most of them came crashing back down today, as did Wall Street in general.

Trump Crypto Rally Fizzles After Skepticism on Reserves Plan

(Bloomberg) — Donald Trump’s announcement that the US will include three lesser-known digital tokens in its strategic crypto reserve was greeted with skepticism in the industry, with investors questioning the project’s merits and the coins he selected giving up some of their initial gains.

Trump said Sunday on Truth Social that the XRP, SOL and ADA tokens will be included in the reserve, along with Bitcoin and Ether. The news ignited an immediate crypto rally, offering relief to an asset class fresh off its worst month since 2022.

Yet the initial euphoria soon gave way to questions about everything from the feasibility of Trump’s plan to the motivations behind it. Crypto markets were mostly back in the red on Monday, with XRP, SOL and ADA each suffering intraday declines of more than 10% after soaring the day before.

The February crypto rout had put pressure on Trump, who returned to the White House after the industry showered him with campaign donations and praise. Even the Securities and Exchange Commission’s reversal of a years-long crackdown had failed to stem the selloff, which many attributed in part to nervousness about Trump’s trade tariffs and dramatic moves to gut government programs. (Source.)

Financial advisor Catherine Austin Fitts of the Solari Report has been very vocal against any kind of Bitcoin or Crypto Reserve by the government, referring to it as a “reverse Robinhood” of stealing from the poor and giving it to the rich. Her fears are that such a reserve would be used to buy real assets, such as real estate, while leaving speculative cryptocurrencies in people’s pensions and retirement funds.

Here are a few short video interviews where she discusses this.

The Bitcoin Strategic Reserve Fund Is about a Land Grab

Crypto for the Land and Real Estate Swap Is Coming

By Breaking Securities Laws, Musk’s Conflicts of Interest Are off the Charts

Catherine and the Solari Report has a Substack Page now, and she published a good overview and summary of this proposed Crypto Reserve at the end of December.

BITCOIN BAILOUT: Why a Bitcoin Strategic Reserve Is a Bailout of the Big Boys

Excerpts:

Who Is Proposing the Creation of Bitcoin Strategic Reserves?

Several proposals for a Bitcoin strategic reserve were floated during the 2024 U.S. presidential election campaign.

At the Bitcoin 2024 conference in Nashville in July, President Trump promised, if elected, to fire Securities and Exchange Commission (SEC) Chairman Gary Gensler, whose regulatory policies and enforcement are unpopular with the crypto industry. In addition, Trump proposed halting sales of existing DOJ holdings of approximately 208,000 Bitcoins representing asset seizures and moving the position to Treasury as a permanent holding. This would ease downward price pressure in the relatively illiquid Bitcoin market.

To great applause, at that same conference Robert F. Kennedy Jr. proposed a long-term mandated Bitcoin buying program by the federal government, promising that this would raise the Bitcoin price significantly. He also proposed that sellers should be allowed to remain confidential and have the opportunity to reinvest their proceeds on a tax-free basis by qualifying the exchange of Bitcoin for real estate as a qualifying Section 1031 like-kind exchange.11 This could result in extraordinary windfall profits to the “Bitcoin billionaires.”

The first Trump Administration, in 2018 in response to lobbying by the tech industry, created a tax vehicle called Opportunity Zones. Currently, capital gains from cryptocurrency transactions can be reinvested tax-free in Opportunity Zone assets.

Trump Transition Co-Chair Howard Lutnick, now nominee for Secretary of Commerce, also spoke at the Bitcoin 2024 conference. Lutnick is Chairman of primary dealer Cantor Fitzgerald, the leading manager of stablecoin Tether’s investments in U.S. Treasury securities.

The candidates’ very presence at Bitcoin 2024 reflected the significant increase in donations from the crypto industry and investors. The crypto industry was the largest corporate donor industry category during the 2024 election campaign, with over $200 million of donations.

Subsequent to the election, numerous proposals for government Bitcoin strategic reserves have been floated by crypto enthusiasts. Legislators are experiencing astroturf lobbying efforts, and federal and state legislation has been proposed that would mandate or permit the federal and state purchase or holding of Bitcoin and permit the payment of state taxes with Bitcoin.

How such purchases would be financed is not yet clear. At the federal level, purchases could be financed from appropriations, which depend on sales of Treasury notes and bonds, a growing percentage of which are purchased by American retirement funds or monetized through the Federal Reserve in a way that is driving inflation. Another source of funding for Bitcoin strategic reserves could be asset seizures by the DOJ.

Bitcoin lobbyists have suggested the following questionable reasons for such an investment by a government:

1. To show a commitment to embracing innovation and driving economic progress
2. To showcase a dedication to financial advancement and pave the way for a thriving future
3. To boost financial stability with a “high-performing” asset
4. To become a destination for Bitcoin entrepreneurship and innovation
5. To create new jobs

Of course, such lobbyists make no mention of the energy and technology consumption and environmental stress that would necessarily accompany such a reserve, the volatile nature of the crypto markets, or the regressive nature of a system in which working class, government, and other workers’ retirement accounts are used to fund the buy-out of Bitcoin billionaire crypto positions. If the returns on Bitcoin to date are dependent on attracting more speculators into a Ponzi-type speculation, it is clear that there will be no investor large enough to keep the historical returns going.

The central banks and large gold investors have traditionally generated revenues on their precious metals inventories by leasing their gold; this is one of the reasons there are concerns about collateral risks in the precious metals markets. Clearly, the Treasury could lease Bitcoin holdings to ETFs, which could solve the exchange-traded funds’ challenge of acquiring Bitcoin in a relatively illiquid market. This would make it easier for BlackRock, Graystone, Fidelity, and other ETF sponsors to market their Bitcoin ETFs to institutional investors, including state pension funds.

States typically run balanced budgets using tax collections (and sometimes borrowing) to fund current expenses. Acceptance of Bitcoin in payment of state user fees and taxes for long-term holding would tie up current revenues and require increased borrowing, higher taxes, or cutting expenses.

If state investment guidelines are modified to treat Bitcoin as a “permitted investment” for state rainy day funds or state pension funds, state fund managers would necessarily sell investments in real and performing assets—including real estate, securities backed by real assets, bank certificates of deposit, and bonds of federal, municipal, and corporate enterprises—in order to invest in speculative assets. Doing so would generate no productive economic activity other than the generation of profits for speculators, including the early Bitcoin insiders and billionaire campaign donors.

Cui Bono? The Bailout of the Big Boys

We can see why large Bitcoin holders would want federal and state buying programs to help them increase prices and create a sufficiently liquid market to make it possible to exit their positions, particularly before the Bitcoin ecosystem becomes unsustainable and the competition for increasingly scarce energy resources and the growing environmental damage become more widely understood.

We can also see why ETF sponsors would view federal and state purchases and holdings as a highly profitable way to build their asset management business in digital assets. Finally, we can see why some politicians might be interested in campaign donations that could result from the facilitation of donor profit-taking through large crypto sales and ballooning government investment in digital assets.

However, using taxpayers’ and state pension funds’ money to fund Bitcoin reserves serves no public purpose. If citizens want to purchase speculative digital assets in a dark market, they can do so on their own accord. They should not be forced to do so by government mandates that represent a reverse Robin Hood scheme where the government takes from the poor to give to the rich.

If government can afford to buy private crypto assets, it can afford to—and should—cut taxes instead. Let citizens decide if, in what, and when they wish to speculate. Citizens do not need Bitcoin to fight inflation. What they could use to fight inflation is lower taxes, basic infrastructure, and public services that support a productive economy.

These are the types of investments that generate the healthy children, strong education, skills-building, and entrepreneurial activity that lead to employment and income growth. Citizens do not need government to use their precious resources to further speculative bubbles that increase the income gap. (Full article.)

Comment on this article at HealthImpactNews.com.

This article was written by Human Superior Intelligence (HSI)

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