Adding Cryptocurrency To National Reserves

In a historic decision, U.S. President Donald Trump has announced that Bitcoin (BTC), Ethereum (ETH), XRP, Solana (SOL), and Cardano (ADA) will be added to the U.S. national reserves. This move marks a major shift from traditional financial policies and highlights the growing influence of digital currencies in the global economy. By integrating cryptocurrencies into national reserves, the U.S. recognizes the increasing significance of blockchain technology and decentralised finance (DeFi) .

This decision has sparked widespread debate among politicians, economists, and technology experts. Supporters argue that adding cryptocurrencies could help stabilise the economy, protect against inflation, and position the U.S. as a leader in the digital financial revolution. Bitcoin, often called “digital gold,” is valued for its limited supply and decentralised nature, making it a strong candidate for preserving national wealth.

Ethereum, the second-largest cryptocurrency, offers smart contract technology, which could revolutionise government financial processes. Experts suggest that Ethereum’s blockchain could reduce bureaucracy, enhance transparency, and improve the efficiency of transactions. The inclusion of XRP, Solana, and Cardano in the national reserves suggests that the U.S. is not just focusing on store-of-value assets but also on blockchain utility.

XRP is widely used for international money transfers and could facilitate faster, cheaper cross-border payments. Solana, known for its high-speed transactions and low fees, has potential applications in national financial systems. Meanwhile, Cardano, which follows a research-driven approach, focuses on sustainability and security in blockchain development.

Potential Risks, Global Reactions, and Economic Impact

Despite the excitement, critics have raised serious concerns about the risks involved in this decision. Cryptocurrencies are highly volatile, and their decentralised nature makes them difficult to regulate. Unlike traditional reserves such as gold or foreign currency, digital assets can experience sudden price fluctuations, leading to potential financial instability.

Another major concern is cybersecurity. Cryptocurrency exchanges and wallets are frequent targets for hackers, raising fears about the security of national crypto holdings. If the U.S. fails to implement strong security measures, a major cyberattack could compromise national financial stability.

Regulatory uncertainty is also a key challenge. The U.S. government has struggled to set clear policies for digital assets, with the Securities and Exchange Commission (SEC) frequently taking legal action against crypto firms. A lack of regulatory clarity could create confusion in financial markets and affect investor confidence.

Despite restrictions, Pakistan ranks among the top 10 countries in global crypto adoption, mainly through peer-to-peer (P2P) platforms

Trump’s decision reflects a growing global trend. Some countries, such as El Salvador, have already adopted Bitcoin as legal tender. Central banks worldwide are researching digital currencies, including Central Bank Digital Currencies (CBDCs), as they explore alternatives to traditional financial systems. The U.S. move could encourage other nations to reconsider their stance on cryptocurrencies.

Following Trump’s announcement, cryptocurrency prices surged. Bitcoin jumped over 10%, reaching $93,000 before stabilising at around $90,000. Ethereum experienced a 12% increase, XRP rose by 18% to $2.63, Solana gained 13% to reach $159.75, and Cardano saw an impressive 48% rise to $0.96. These price spikes indicate strong market confidence in Trump’s crypto-friendly policies (CoinDesk, 2024).

However, reactions from global financial institutions have been mixed. The International Monetary Fund (IMF) has expressed caution, warning that the integration of volatile digital assets into national reserves could pose economic risks. The European Union has voiced similar concerns, stating that cryptocurrencies should not replace traditional financial systems without strong regulations. Meanwhile, China has strongly criticised Trump’s decision, calling it “reckless” and accusing the U.S. of attempting to undermine the digital yuan.

Implications for Pakistan and the Future of Cryptocurrency

For Pakistan, Trump’s move could have significant implications for cryptocurrency regulation. The State Bank of Pakistan (SBP) currently bans financial institutions from dealing with cryptocurrencies due to concerns over fraud, money laundering, and the lack of oversight. However, as global acceptance of crypto grows, Pakistan may face pressure to reconsider its stance.

Despite restrictions, Pakistan ranks among the top 10 countries in global crypto adoption, mainly through peer-to-peer (P2P) platforms. Many freelancers, startups, and entrepreneurs rely on digital assets for international transactions, using offshore exchanges and informal networks. If more countries embrace cryptocurrencies, Pakistan’s strict policies could hinder economic growth.

A well-regulated crypto market could attract foreign investment, support digital remittances, and boost the fintech sector. The Financial Action Task Force (FATF) has recommended strong Know Your Customer (KYC) and Anti-Money Laundering (AML) measures to ensure the safe adoption of digital assets. If Pakistan implements these safeguards, it could benefit from the global shift towards digital finance.

In a related development, the Pakistani government has appointed Bilal bin Saqib as the chief adviser to the finance minister for the newly announced Pakistan Crypto Council. On February 25, the finance ministry revealed plans to establish a National Crypto Council to explore the adoption of digital currencies.

Finance Minister Muhammad Aurangzeb recently met with a foreign delegation, including advisers from Trump’s team, to discuss digital assets. A statement from the Finance Division emphasised that Saqib’s appointment highlights Pakistan’s commitment to digital innovation and financial security. Saqib, who is featured in Forbes’ ‘30 under 30’ list, is also the co-founder of Tayaba, a social enterprise addressing water shortages in Pakistan.

Trump’s move has set the stage for a new era in financial policy. Whether this decision proves to be a game-changer or a risky gamble will depend on how well governments, financial institutions, and regulatory bodies adapt to the evolving landscape of digital currencies.