Is Trump’s crypto reserve plan a scam?

President Trump was very bullish about his decision over the weekend to create a “crypto reserve.” It will legitimize crypto currencies, he said. It will turn the United States into the global hub for trade. And it will build the national wealth. In effect, the American government will build up a stock of Bitcoin and other digital currencies, much like the gold held in Fort Knox. But Trump’s promise is too good to be true: it is a dangerous scam.

Trump’s crypto reserve will be wide open to market manipulation by the tech tycoons around him

“I will make sure the US is the Crypto Capital of the World,” Trump wrote on Truth Social. “We are MAKING AMERICA GREAT AGAIN.” The idea was pushed on the campaign trail, but Trump has now gone a step further, announcing the “currencies” they plan to stock in the reserve, including Bitcoin, Solana and Ethereum. Not surprisingly, Bitcoin rose 11 percent on the news, while Cardano, one of the smaller tokens on the list, rose 71 percent. Investors lucky enough to hold those assets will have made a lot of money.

Sure, it is possible to make an argument for a crypto reserve. If governments hold gold, plus foreign exchange reserves — and most have always done so — then it makes sense to hold some digital currencies as well. And in fairness, it will help give some official approval to what is clearly an important asset. Who knows, if they carry on going up in price, the government might even make some money.

The trouble is, there are three big problems with Trump’s plan. Most importantly, there is no need for a crypto reserve. The entire point of such currencies is that they are free of government intervention. If the American government becomes a major player in the market, that undermines their whole purpose. At the same time, cryptos have been doing just fine at moving into the mainstream without any help from the state. They don’t need any more.

Trump’s plan will also be very expensive. The American president has not said how much will be spent on the “reserve.” But one Republican-backed bill in the Senate suggests buying $94 billions of Bitcoin, based on current prices. We all understand that Elon Musk is going to cut a lot of waste, but it is hard to know where all that money is going to come from, given that the US is already running a deficit of almost 6 percent of GDP.

Most concerningly, if Trump’s crypto reserve becomes a reality, it will be wide open to market manipulation by the tech tycoons around the president. Musk already has his own digital currency, and so does the president, plus of course his wife. While those tokens were not on the list, the whole industry will still be boosted if the Treasury becomes a major buyer. A crypto reserve may give a few traders a bump and allow a few smart investors to make a lot of money. But the blunt truth is this: it is pointless and expensive — and it is only going to end badly.