Analysis of the US Crypto Strategic Reserve: Which Cryptocurrencies Can Be Used as Reserve Assets

Author: Samson Mow, CEO of Jan3; Translated by: Jinse Finance xiaozou

I have been thinking about the issue of the US Bitcoin/cryptocurrency strategic reserve recently, and I think there are two possible outcomes:

Result 1: The reserve asset is only Bitcoin (BTC), and none of the altcoins mentioned by Trump can be selected; Result 2: We will accelerate into an unprecedented state of degradation.

First, we should solve a key problem. Why do I say that none of the altcoins Trump mentioned are eligible for the reserve?Didn’t the President just say that he was going to include XRP, SOL, ADA, and ETH in the reserve?

Can Trump really unilaterally decide on reserve assets? I don’t think so. That would require a report/proposal from the task force, and then Congress would need to pass legislation.

So why did Trump say that he was “instructing the task force to move forward with a strategic reserve of cryptocurrencies that would include these altcoins”? Why would a politician say that? (No offense to politicians.)

I’m pretty sure Trump knows that he can’t actually ensure that these assets will be included, but he certainly can instruct the task force to do something — that doesn’t mean it will happen.

There is some argument that some traders benefited from opening long positions ahead of time, and that these trades may have been tied to Trump. But the simpler possibility is that this was just to appease lobbying groups that are pushing hard for their own cryptocurrencies to be included in the reserve. Maybe it was to get some donations? There were leaks that gave some traders an edge - but that could have been leaked by their social account managers or the platforms themselves.

This post by Trump could also be about providing some exit liquidity to lobbyists or donors for Ripple or Cardano. It makes sense to pump these cryptocurrencies now because once the real report with the list of cryptocurrencies or standards comes out, it will be too late.This is consistent with why Trump pushed Trump Memecoin before he took office, and he can no longer do so after he took office.

Who knows? Anything is possible. The only thing we know for sure is that you don't post something on a low liquidity Sunday for no reason to pump a cryptocurrency.

One ​​of the reasons the United States is a major financial center is that its relatively complete rule of law and guidelines make almost everything reasonable. That’s why people from all over the world feel safe investing in Bitcoin ETFs and securities in the US.

It would be very bad for the US if Trump could unilaterally pick and choose some altcoins to include in the national reserve. Things would no longer be rational, but laissez-faire.

This would lead us to the second path: accelerated degradation. The impact would go far beyond “cryptocurrency” and could even destroy the US financial system - more seriously than the past decades of fiscal mismanagement.

Okay, so now let’s look at the first path: Why won’t the cryptocurrency reserve include XRP, SOL, ADA and ETH?

Here’s the reason: The US is an important financial center and relies on its rule of law and guidelines.The same applies to the Bitcoin Strategic Reserve or the Crypto Strategic Reserve.

The Presidential Task Force tasked with promoting the Cryptocurrency Reserve (let’s call it that, since Trump is calling it that) needs to define many things, including the criteria for inclusion in the reserve.

There will have to be screening guidelines – since we are not on the second path yet, there should still be a path to rationalization. I expect there will be a list of requirements for inclusion in the reserve, just like we have the Howey test to define securities qualifications. As a reminder, Ethereum does pass the Howey test.

When the Presidential Task Force writes its report and defines the criteria for which cryptocurrencies can be included in the reserve, I believe they will reach a consensus similar to the following.

‌Crypto Strategic Reserve Asset Requirements‌:

- Reserve assets must be based on Proof of Work to ensure basic integrity and immutability. Proof of Stake assets cannot be included, otherwise a foreign power can gain control simply by owning the asset.

- The reserve asset must dominate its hash function to ensure attack resistance.

- The reserve asset must not be merged-mined or dependent on the security of another asset.

- The reserve asset must not be pre-mined or distributed to insiders.

- The reserve asset must have been in existence and in operation for at least 10 years.

- The reserve asset must not be a security, and if there is reasonable doubt, an in-depth investigation must be conducted.

- The reserve asset must be able to be securely stored in cold storage using a multi-signature (multisig) system that does not involve blind signatures.

- The blockchain of the reserve asset must be fully complete and verifiable from the genesis block.

There may be more conditions depending on how seriously the United States wants to be taken.

So, based on this list of conditions, what else can be added? It certainly isn’t XRP, SOL, ADA, and ETH.

In addition to Bitcoin, Trump’s strategic cryptocurrency reserve may also include:

Litecoin and Monero

If they don’t consider merged mining and hash function dominance requirements, then Dogecoin and Namecoin can also be added. Given Elon Musk’s prominent position in the Trump administration, I’m sure he will find a way to rationalize the inclusion of Dogecoin.

In addition to which assets qualify for inclusion in the strategic cryptocurrency reserve, there are many other questions, such as:

- Which government department will oversee the reserve?

- How will the reserve be secured? Self-custody or escrow?

- What is the procurement process for assets?

So you can see that the task force has a lot of work to do.

To avoid going down the second path, it is important to take the screening process seriously. It is important to note that the Trump administration's crypto chief is David Sacks, who has a serious conflict of interest because he holds a large amount of Solana. Even without considering David, people's perception is important because it cannot be seen that assets are carefully selected to benefit certain individuals or companies.

So, the conclusion is:

- Trump cannot randomly select assets to include in the cryptocurrency strategic reserve.

- There will be a report or proposal that lists the criteria for inclusion in the reserve, which will then need to be approved by Congress.

- It is almost impossible for them to come up with a serious set of criteria that would allow altcoins like XRP through while excluding any random meme coin.

- The crypto reserve is likely to be mostly Bitcoin and a handful of other Proof of Work (PoW) coins.

- The crypto reserve is likely to be established because Trump seems determined to deliver on his "Crypto Capital" promise.

- If the crypto reserve is filled with altcoins, then be prepared for an accelerated state of degradation that has never been seen before.

Plan accordingly.