Bitcoin and American politics during Trump's second term

NASHVILLE, TN – Donald Trump during his speech at the Bitcoin 2024 conference in Nashville, TN. … [+] (Photo by Johnnie Izquierdo for The Washington Post via Getty Images)

The Washington Post via Getty Images

Former President Donald Trump's decisive victory over Vice President Kamala Harris set the stage for a seismic shift in US economic policy and Bitcoin regulation.

Trump's re-election comes amid an unprecedented Bitcoin rally, signaling market confidence in a new era for digital assets.

Trump's campaign was marked by repeated commitments to a pro-bitcoin environment, from his appearance at the Bitcoin conference in Nashville to closed-door discussions with industry leaders. His victory now begs the question: what should we expect for bitcoin in Trump's second term?

Free Bitcoin and clean house

The first priority of new administrations should be to announce that the digital assets sector is here to stay and that banks must be confident that the federal government will not prevent them from working with financial innovators.

This would be the first step in a process aimed at reversing the trend toward debanking that hampered financial innovation under the previous administration.

Next, it should overhaul major regulatory agencies, including the Federal Reserve, FDIC, Consumer Financial Protection Bureau (CFPB), Securities and Exchange Commission (SEC), and others. By installing leadership at the top of these institutions that understand bitcoin and the opportunities it presents, Trump can unleash an era of bitcoin-backed prosperity that would benefit all Americans.

In addition to regulatory reform, Trump is expected to appoint a special prosecutor to investigate allegations that agencies including the Department of Justice (DoJ), the Federal Reserve and the FDIC may have pressured banks to They avoid digital asset companies.

FTX's ties to prominent politicians are also expected to come to light. American citizens should not have to live in fear of being accused of financial compliance transgressions when such corruption has infected the highest levels 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 in the future.

Bitcoin Strategic Reserve: Ensuring American Dominance

Perhaps the most transformative initiative on the horizon comes from Congress, the Bitcoin Act of 2024, which would establish a strategic Bitcoin reserve in the United States.

Introduced by Republican Senator Cynthia Lummis, this legislation would position bitcoin as a reserve asset similar to the role of gold in previous eras, cementing America's role as a leader in the emerging global digital economy.

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

To fuel this reserve, the law includes a federal Bitcoin purchase program. Under this provision, the Treasury Secretary would have the authority to purchase up to 200,000 bitcoins per year for five years.

The law requires quarterly public reporting and cryptographic attestations of bitcoin holdings, verified by independent auditors. This would serve as an example of new technology used for transparent governance.

The State Participation Act provision would allow each U.S. state to store its own bitcoin holdings in separate accounts within the Federal Bitcoin Reserve. By preserving states' ownership rights to their bitcoin, this feature encourages state-level adoption while providing the benefits of federal infrastructure.

Finally, the law affirms the rights of private bitcoin holders and explicitly states that it does not grant the government the power to seize or interfere with private bitcoins. This reassurance of natural property rights ensures citizens and businesses can legally purchase, hold and use bitcoins without fear of their rights being violated.

By passing this legislation, the United States would set the stage for other countries and institutions to follow its lead. Ultimately, this 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-term inflationary pressures, clearly argue in favor of bitcoin as a stabilizing force.

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

Strive Asset Management, a company co-founded by Vivek Ramaswamy, is integrating Bitcoin into the standard wallets of everyday Americans. The recent $30 million funding round demonstrates growing interest in bitcoin-backed financial products, and the company's approach could catalyze similar moves by other asset managers.

On Monday, British pension consultancy firm Cartwright recommended a 3% bitcoin allocation to an institutional client, marking a historic first for a British pension fund. This development reflects the gradual acceptance of stocks in the 1970s, suggesting that institutions around the world are beginning to view bitcoin as a necessary part of diversified portfolios. Sam Roberts, director of investment advice at Cartwright, predicted competitors would soon follow suit.

Bitcoin in Trump's second term

Economic indicators suggest a favorable environment for Bitcoin growth. With employment numbers and GDP growth stabilizing, the Federal Reserve recently cut interest rates, fueling optimism about a lasting market recovery. Rate cuts often signal a weaker dollar, which can boost demand for hard assets like Bitcoin.

Lower borrowing costs are also encouraging investors to look for other stores of value, with bitcoin emerging as a top choice amid inflation, which is now expected to persist above 2% as the American economy is reorienting towards a strong dependence on customs tariffs to increase its revenues.

With a Republican-controlled Congress, the likelihood of passing the Bitcoin Act and similar legislation becomes stronger. Trump's radical break with the past, possibly even including a repeal of the income tax, could mark the start of an era where the United States leads Bitcoin adoption and financial sovereignty, creating a powerful precedent for other countries.

As Trump pointed out in a recent social media post commemorating the 16th anniversary of Satoshi's white paper, Bitcoin will be MADE IN THE USA. If the Trump administration keeps its promises, the next four years could make the United States the bitcoin capital of the world, a transformation that could redefine the financial landscape for generations.

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