Chip Daniels, CEO of Salomon Brothers, argues that holding Bitcoin by the US government is not an endorsement but a strategic move towards becoming a fintech powerhouse. He refutes the concerns of critics, highlighting the economic rationale and the potential benefits of embracing digital currencies.
Holding Bitcoin (BTC) is not necessarily an endorsement, but it's undeniably in the best interests of the United States as it strives to become a dominant force in the fintech world. This argument is put forth by Chip Daniels, the chief executive officer of Salomon Brothers. President Trump has proposed that the Federal government should hold digital currencies , a suggestion met with resistance from some media outlets and political figures who have voiced dire warnings.
However, the reality of Trump's proposal diverges significantly from the alarming narrative presented by his critics. BTC does not pose a threat to the U.S. dollar, and the U.S. government holding BTC or any other digital currency is not an endorsement. The U.S. dollar continues to reign supreme globally, accounting for nearly 60% of all currency held by central banks, as of December 2024. Unlike fiat currencies, Bitcoin and other digital currencies are not subject to the control of any central bank. Consequently, there is no possibility of an adversarial relationship with the issuer of BTC, unlike with the issuers of currencies like the Chinese yuan or Russian rubles.Most of the U.S.'s foreign exchange reserves are currently held in euros and Chinese yuan. However, there are no calls for the U.S. to cease holding euros. This is because holding a currency in reserve does not constitute an endorsement of that currency. Countries primarily hold foreign exchange reserves for liquidity purposes, mainly to facilitate foreign trade with parties using a different currency. Given that BTC and ETH are the largest digital currencies, boasting the highest liquidity and the largest volume of USD transactions, it makes logical sense for the U.S. to hold these currencies.Furthermore, the U.S. dollar vastly surpasses BTC in size. The USD value is more than 1,150 times larger than BTC, at $2,300 billion USD compared to approximately $2 billion for BTC. BTC ranks as only the 16th largest foreign currency globally, measured in USD. Moreover, the U.S. possesses extensive reserves of gold and silver, neither of which is currently used as currency by any major country. There appears to be no risk that these U.S. holdings will be perceived as an endorsement of gold as a currency, even though gold is held by the U.S., in part, because it serves as a valuable store of value. Critics of digital currencies argue that they lack inherent value, but this is akin to saying a Picasso holds no inherent value beyond the inherent value of dried paint and an old canvas. Similar to BTC, a Picasso's value stems from its social value and scarcity value. Bitcoin's social value arises from its objective to function outside the control of governments. Its scarcity value helps support BTC's price and enhances its utility as a store of value.There is another compelling reason for the U.S. to hold virtual currencies: they represent a significant leap forward in financial technology. It is in the paramount interest of the United States to remain at the forefront of fintech innovation. This is not only to make the U.S. the most efficient financial player but also to be best prepared for any future changes. Blockchain technology has proven to have numerous applications beyond digital currencies, including reducing transaction costs, which ultimately benefits all consumers.Therefore, not only is Trump's proposal grounded in solid economics and aligns with holdings of other foreign currencies, but it also provides a boost to the fintech sector. It is a smart and forward-looking move that appears to offer a double win for the U.S.
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