Bitcoin And U.S. Policy In Trump’s Second Term

Former President Donald Trump’s decisive victory over Vice President Kamala Harris set the stage for a seismic shift in U.S. economic policy and bitcoin regulation.

Trump’s re-election comes amidst an unprecedented bitcoin rally, signaling market confidence in a new era for digital assets.

Trump’s campaign was marked by repeated commitments to fostering a bitcoin-friendly environment, from his appearance at the Bitcoin Conference in Nashville to closed-door discussions with industry leaders. His victory now raises the question: What should we expect for bitcoin in Trump’s second term?

Unleashing Bitcoin and Cleaning House

The new administration’s first priority should be to announce that the digital asset industry is here to stay, and that banks should feel confident that the federal government will not stand in their way of working with financial innovators.

This would serve as the first step in a process of reversing the trend of “de-banking” that has hindered financial innovation under the previous administration.

Next, he should shake up key regulatory agencies, including the Federal Reserve, FDIC, Consumer Financial Protection Bureau (CFPB), Securities and Exchange Commission (SEC), and more. By installing leadership atop these institutions that understand bitcoin and the opportunity it presents, Trump can unleash an era of prosperity underwritten by bitcoin that would benefit all Americans.

In addition to regulatory reform, Trump should appoint a special prosecutor to lead an investigation into allegations that agencies like the Department of Justice (DoJ), Federal Reserve, and FDIC may have pressured banks to shun digital asset companies.

The ties between FTX and prominent politicians should also be dragged into the light. American citizens should not have to live in fear of being accused of financial compliance transgressions while such corruption has infected the highest level of our own representative government. Coming clean about what happened with FTX would not only restore industry confidence but also set a precedent for government accountability going forward.

Strategic Bitcoin Reserve: Securing U.S. Dominance

Perhaps the most transformative initiative on the horizon comes out of congress – the Bitcoin Act of 2024, which would establish a U.S. Strategic Bitcoin Reserve.

Introduced by Republican Senator Cynthia Lummis, this law would position bitcoin as a reserve asset akin to the role of gold in previous eras, solidifying America’s role as a leader in the emerging global digital economy.

At the heart of the Bitcoin Act is the establishment of a Strategic Bitcoin Reserve, a network of secure storage facilities across the U.S. where government-owned bitcoin would be held in cold storage. This decentralized approach minimizes security risks and sets a new global standard for sovereign bitcoin reserves, positioning the U.S. as a leader in a new global economy based on the scarcest asset ever discovered.

To populate this reserve, the act includes a Federal Bitcoin Purchase Program. Under this provision, the Secretary of the Treasury would have the authority to buy up to 200,000 bitcoins annually for five years.

The act mandates quarterly public reports and cryptographic attestations of bitcoin holdings, verified by independent auditors. This would serve as an example of new technology being utilized for transparent governance.

The state participation provision of the law would allow individual U.S. states to store their own bitcoin holdings in segregated accounts within the federal bitcoin reserve. By preserving states’ ownership rights over their bitcoin, this feature encourages adoption at the state level while offering the benefit of federal infrastructure.

Finally, the act affirms the rights of private bitcoin holders and explicitly states that it does not grant the government authority to seize or interfere with privately owned bitcoin. This re-underwriting of natural property rights assures citizens and businesses that they can lawfully buy, hold, and use bitcoin without fear of their rights being violated.

By enacting this legislation, the U.S. would lay the groundwork for other countries and institutions to follow. In time, it would lead to bitcoin becoming a parallel reserve asset in global finance.

Institutional Adoption

The economic rationale behind Trump’s pro-bitcoin stance aligns with broader macroeconomic trends. Underlying factors, such as unsustainable global debt levels and long-run inflationary pressures, paint a clear case for bitcoin as a stabilizing force.

These are the same factors that are increasingly driving bitcoin adoption by large financial institutions.

Strive Asset Management, a firm co-founded by Vivek Ramaswamy, is integrating bitcoin into standard portfolios for everyday Americans. Strive’s recent $30 million funding round signals growing interest in bitcoin-backed financial products, and the firm’s approach could catalyze similar moves by other asset managers.

On Monday, the U.K.-based pension advisory firm Cartwright recommended a 3% bitcoin allocation for an institutional client, marking a historic first for a U.K. pension fund. This development mirrors the gradual acceptance of equities in the 1970s, suggesting that institutions worldwide are beginning to view bitcoin as a necessary component of diversified portfolios. Sam Roberts, Cartwright’s Director of Investment Consulting, predicted that competitors would soon follow suit.

Bitcoin In Trump’s Second Term

Economic indicators suggest a favorable environment for bitcoin growth. With stabilizing employment figures and GDP growth, the Federal Reserve recently cut interest rates, fueling optimism for a sustained market rally. Rate cuts often signal a weaker dollar, which can drive demand for hard assets like bitcoin.

Lower borrowing costs also encourage investors to seek alternative stores of value, with bitcoin emerging as a premier choice amid inflation, which is now expected to persist above 2% as the U.S. economy reorients itself to a heavy reliance on tariffs to raise revenue.

With a Republican-controlled Congress, the likelihood of passing the Bitcoin Act and similar legislation grows stronger. Trump’s radical break with the past, possibly even including an elimination of income tax, could mark the start of an era where the U.S. leads in bitcoin adoption and financial sovereignty, setting a powerful precedent for other nations.

As Trump emphasized in a recent social media post commemorating the 16th anniversary of Satoshi’s white paper, “Bitcoin will be MADE IN THE USA.” If Trump’s administration follows through on its promises, the next four years could establish the U.S. as the global capital of bitcoin – a transformation that may redefine the financial landscape for generations.