Is Trump’s Strategic Bitcoin Reserve a Threat to Freedom?

Donald Trump takes office with the intention of making the United States the Bitcoin mining capital of the world. Many celebrate the idea of ​​Bitcoin as a strategic reserve asset. Supporters like Michael Saylor, Tether and other large institutional players say this is a historic achievement, solidifying Bitcoin’s status as a legitimate store of value. However, this increasing institutionalization risks undermining bitcoin’s initial ethos as “freedom money”, with its decentralization and censorship resistance eroding under the weight of regulatory and economic control.

Centralize Bitcoin mining

The Trump administration has made bitcoin mining a national priority, presenting it as an opportunity to dominate the “block space.” Rachel Silverstein, Bitfarms’ U.S. general counsel, said on election day that, “In my mind, sanctions are a way to avoid war,” and he went on to say that it was important to leave sanctions as a tool that states can use.

Bitcoin blocks have a finite capacity, limiting the number of transactions that can be included in each block. Fred Thiel, CEO of Marathon Digital, commented in an article: “Block space ensures the ability to transact. Let’s keep the United States as the most dominant Bitcoin mining country in the world. » This dominance could allow the United States to impose censorship of transactions by complying with Office of Foreign Assets Control sanctions or other regulatory tools.

The precedent for such control already exists. In 2021, Marathon attempted to mine “OFAC-compliant” blocks, filtering transactions from sanctioned entities. More recently, mining pools like F2Pool have been reported to potentially exclude sanctioned transactions. Trump’s push for mining dominance presents a clear path toward institutionalizing these practices, leveraging tools like the Bank Secrecy Act and FATF recommendations that promote widespread KYC and classify wallet software as providers crypto asset services.

Global adoption of American standards

American regulations often set the tone for the international community, particularly when it comes to financial systems. For example, the FATF’s global anti-money laundering standards reflect U.S. priorities, and its recommendations have influenced crypto regulations around the world. The Trump administration could use the dominance of the bitcoin mining sector to propagate a framework consistent with U.S. geopolitical goals. Former White House cybersecurity advisor Carol House suggested during a 2023 speech that network-level censorship could serve national interests, demonstrating the feasibility of regulating bitcoin under the guise of national security.

The United States has a history of extending its financial jurisdiction beyond its borders to combat illicit activities. For example, in January 2023, the U.S. Department of the Treasury’s Financial Crimes Network identified Bitzlato Limited, a Hong Kong-registered cryptocurrency exchange, as a “primary money laundering concern” due to its links with Russian illicit finance. This designation led to a ban on certain fund transmissions involving Bitzlato by any covered financial institution, thereby limiting its operations globally.

In March 2023, U.S. and German authorities shut down ChipMixer, a cryptocurrency service that allegedly laundered more than $3 billion in crypto assets since 2017. ChipMixer was allegedly used by ransomware groups, suspected North Korean hackers and users of the darknet market to conceal the origins of illicit activities. funds. These actions demonstrate how the United States is expanding its regulatory reach to enforce financial laws internationally.

Bitcoin’s strategic reserve asset

Proponents like Senator Cynthia Lummis present the SBR as a solution to America’s economic challenges, saying it could “address a significant portion of our debt” and strengthen our global positioning. Michael Saylor, CEO of MicroStrategy, the proposals go further, suggesting that the US government should acquire 20-25% of bitcoin to “control the global reserve capital network”.

Saylors Digital Assets Framework highlights the role of criminal liability in ensuring compliance and transparency, ensuring that participants adhere to legal and ethical standards while minimizing fraud and misconduct. Frameworks like this could be leveraged to increase centralization, potentially strengthening the United States’ grip on bitcoin and transforming it from an open, neutral network into a governance tool.

This narrative hides the dangers of institutionalizing Bitcoin. Saylor acknowledged the risks associated with failing to meet regulatory standards, saying: “I think when Bitcoin is owned by a group of crypto-anarchists who are not regulated entities, who don’t recognize the government or don’t recognize the taxes. or do not recognize reporting requirements, this increases the risk of seizure. This perspective aligns with measures such as Lummis’ 2023 amendment to the National Defense Authorization Act, targeting anonymous transactions and asset commingling, and shows how the SRA framework could impose oversight strict, thereby reducing bitcoin’s usefulness as a censorship-resistant currency.

Attached

While Bitcoin’s role as an SBR receives attention, stablecoin giant Tether operates in parallel, profiting immensely from global instability. Reports indicate that Tether’s profits in the third quarter of 2024 exceeded those of BlackRock, with Tether reporting a net profit of $2.5 billion, compared to BlackRock’s $1.63 billion net profit for the same quarter.

Tether’s substantial profits were primarily driven by its investments in U.S. Treasury securities, which generated significant returns during the quarter. By backing its reserves with US Treasuries, Tether inadvertently supports US monetary policy while providing a stopgap to regions hit by imported inflation. This maintains US hegemony at the cost of worsening global financial inequality, making Tether a lifeline, control mechanism and major buyer for US debt.

Regulation and influence

Bitcoin is hailed as “freedom money,” a tool of financial sovereignty, free from state control. However, as institutional actors co-opt its narrative, its fundamental properties are under threat. The Bitcoin Strategic Reserve, hailed for accelerating Bitcoin adoption through global game theory and increased legitimacy, also opens the door to excessive regulation that threatens to undermine the network’s decentralization.

On a technical level, the realities of excessive regulation could manifest themselves in the mechanics of Bitcoin mining. Miners facing regulatory compliance may increasingly prioritize compliant transactions, leaving less block space for non-compliant transactions. Over time, this could increase fees for non-compliant transactions, thereby excluding them from the market. This creates a system in which financial sovereignty remains theoretically intact but becomes virtually inaccessible to those unwilling or unable to meet regulatory requirements.

Figures like Donald Trump profit from the systems they claim to strengthen. Just days before his inauguration, President-elect Trump launched a coin called $TRUMP. Announced on its Truth Social and X accounts, the coin’s value jumped more than 300% in a few hours, reaching a market capitalization of $8 billion.

Critics say such companies prioritize hype and profit over meaningful contributions. By focusing on short-term financial gains, these efforts risk trivializing any potential and distracting from its role in promoting financial freedoms and resisting institutional control.

According to an Associated Press article, the Trump Organization, through CIC Digital, controls 80% of the tokens, and plans to release up to 1 billion over three years.

Recover Bitcoin values

The international community must examine the implications of the institutionalization of Bitcoin. Even if the SRA narrative dazzles with its promises of economic stability, it risks undermining Bitcoin’s core mission. Systemic reforms are necessary to preserve its role as a tool of human freedom.

This could require the repeal or reform of laws such as the International Emergency Economic Powers Act, which gives the president the power to regulate commerce during a national emergency, and the Bank Secrecy Act, which imposes strict anti-money laundering and financial surveillance measures.

Senator Mike Lee introduced the Saving Privacy Act in September 2024, aimed at reducing the Bank Secrecy Act’s reporting requirements and strengthening protections for Americans’ financial data, demonstrating growing congressional support for privacy-focused reforms.

Having a legislative framework is one thing: it provides clarity, sets expectations and establishes a legal environment in which people and businesses can innovate. However, the framework should not be so restrictive as to undermine the fundamental principles of Bitcoin.

As Fred Thiel’s comments remind us, “it’s all about block space.” If the United States controls this resource, the ideals of financial sovereignty and permissionless innovation could be irreversibly compromised. The world faces a choice: preserve Bitcoin as a decentralized network for all or let it become a tool of state control.