Why a U.S. Bitcoin Strategic Reserve Is Critical to Fending Off China

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As a seasoned analyst with over two decades of experience in global finance and economics, I’ve witnessed firsthand how the geopolitical landscape has evolved, particularly in the realm of financial warfare. My career has taken me to various corners of the world, from the bustling financial hubs of New York and London to the emerging markets of Asia and beyond.

In my opinion, the United States’ focus on traditional macroeconomic tools like sanctions and promoting the dollar as a reserve currency is no longer sufficient in today’s digital age. The battlefield has shifted from traditional warfare to smartphones and global currency markets, and our adversaries are taking full advantage of this change.

China, in particular, is waging a multi-decade plan to displace the US dollar as the global reserve currency, seeking to weaken our economic and geopolitical influence. This is a threat we cannot ignore, especially when considering the potential consequences of losing this financial battle.

The Chinese Communist Party and the Kremlin are keenly aware of the power that the US dollar holds, and they’re actively building parallel cross-border economic systems to pull our allies into their orbits. The increasing acceptance of Alipay and WeChat Pay by businesses in Japan, for example, gives these Chinese firms unprecedented visibility into individual market transactions—a potential threat should tensions escalate, as in a potential conflict over Taiwan.

In response, the US must take decisive action. We need to export our financial technology and systems worldwide, embracing bitcoin as a strategic reserve asset instead of stifling innovation. The Federal Reserve should consider adding bitcoin to its portfolio of reserve assets, leveraging its global reach and growing adoption. This move would not only strengthen the US’s resilience against economic challenges posed by China’s financial strategies but also demonstrate our commitment to embracing technological advancements in finance.

Of course, some may argue that bitcoin’s volatility makes it unsuitable as a reserve asset. However, as El Salvador’s recent recognition of bitcoin as legal tender has shown, the value can increase significantly over time, especially as adoption grows and the market matures. Plus, who knows? If we play our cards right, we might just find ourselves laughing all the way to the bank—or rather, the blockchain!

In conclusion, the US is already engaged in a multi-front war with China, and finance is one of these fronts. Embracing bitcoin as a reserve asset and empowering our private sector to interact with contested economies worldwide are crucial steps towards maintaining our financial dominance. The world is at a crossroads, and the time for bold action is now. Let’s seize this opportunity to shape the future of finance and safeguard our economic future!

The role of finance in conflicts is growing significantly. Instead of just relying on traditional economic strategies such as imposing sanctions or boosting the use of the dollar as a reserve currency, policymakers from the United States and our allies should broaden their perspective. In today’s world, significant fights are taking place not only on battlefields but also on smartphones and in global financial markets.

China aims to gradually replace the U.S. dollar as the world’s primary reserve currency over a prolonged period. The dollar holds immense importance for the United States, bolstering its economic and political clout worldwide. If this role were lost, our global influence would diminish, and managing our debt could become more challenging. This is exactly what the Chinese Communist Party and the Russian government are aiming for.

Over recent times, China and Russia have significantly decreased their holdings of U.S. Treasury bonds totaling billions of dollars, while simultaneously increasing their gold reserves. The economic sanctions imposed by the West to isolate countries from its economic structure seem less effective against nations capable of managing their financial activities independently and exerting influence globally.

Autocratic rivals such as China, Iran, and Russia are proactively constructing independent economic networks across borders. These networks have the potential to draw in not just nearby nations but also our trading partners who have close ties with them.

Approximately 50% of Japanese businesses utilize Alipay, and about 34% use WeChat Pay. This distribution grants these two Chinese companies unparalleled access to the financial transactions of both Japanese consumers and businesses on an individual level. This could potentially enable China to significantly impact Japan’s economy if tensions rise, especially in a potential dispute concerning Taiwan.

How the U.S. can respond

China views financial technology and cryptocurrencies as means to boost their global financial influence and surveillance, so the U.S. should counteract in twofold: spread our financial technologies globally and adopt Bitcoin as a tactical reserve currency rather than suppressing advancements.

Leaders and political figures across the spectrum, including President-elect Donald Trump, understand the potential advantage of owning bitcoin for the country’s assets as a protective measure against rising inflation rates. This approach could also bolster America’s ability to withstand economic difficulties that may arise from China’s financial tactics.

As a crypto investor, I find it fascinating to consider the composition of the Federal Reserve’s reserve assets. Much like other central banks, their portfolio is richly diverse, encompassing roughly $35 billion in foreign currencies and $11 billion in gold reserves. These holdings underscore America’s robust economic standing and serve as a valuable source of liquidity during turbulent financial times.

However, in our swiftly evolving digital age, the absence of a native digital asset within this portfolio stands out more and more. This gap, I believe, could soon become quite conspicuous if we continue down our current path of digitization.

Bitcoin, due to its expansive influence and increasing popularity, presents an excellent opportunity to bridge this gap. Frequently referred to as “digital gold,” bitcoin is a rare resource. The United States currently holds the largest share of bitcoins among nation-states, having confiscated about 210,000 coins from illicit sources. This puts the U.S. in an advantageous position, potentially safeguarding our financial future.

Some people might contend that Bitcoin’s extreme price fluctuations make it impractical for use as a reserve asset. Yet, this instability is expected to diminish with increased adoption and market development. In the year 2021, El Salvador officially acknowledged Bitcoin as legal tender and started acquiring it for their treasury reserves. They have observed a doubling in value and show no signs of wanting to cash out.

A multi-front war

It’s essential for the U.S. to acknowledge that we are currently engaged in a war on multiple fronts with China. One of these battlegrounds is financial services, and cryptocurrency can be seen as a strategic tool in our defense. If we fail to win this struggle, global financial transactions and personal financial activities could become heavily influenced by hostile states seeking control, surveillance, and dominance – and further threatening our currency’s stability.

Trump expresses this idea when he said to Bloomberg in July, “Should we not act, China may well take the lead with Bitcoin.

As a researcher, I am advocating for the strengthening of America’s financial influence by empowering, facilitating, and motivating our domestic private sector to engage with economies in the Indo-Pacific region and beyond that may be contested. Expanding the utilization of our payment systems, banks, and dollars, even in controversial circumstances, is crucial for this endeavor.

Currently, our opponents are surging ahead due to our inaction. They are spreading their systems, institutions, and monitoring devices across the globe, while we’ve been relatively idle. Meanwhile, TikTok, a significant security concern for us, is captivating an entire American youth generation. We need to mimic this strategy in financial technology, as no disruption would be more detrimental to our adversaries.

As a global citizen who has witnessed the transformative power of technology in shaping economies and societies, I firmly believe that the U.S. should strategically utilize financial technology and cryptocurrencies to enhance its geopolitical influence. My professional background in international relations and finance has shown me that control over resources and economies is a fundamental aspect of power, not just military or security forces.

In my opinion, endorsing decentralized financial technology could provide a lifeline for citizens living under oppressive regimes like Iran. By enabling them to access USD-based stablecoins and payment services using smartphones, we can help break the stranglehold of their governments on economic activity. This move would not only promote financial inclusion but also empower individuals to make choices that are independent of their government’s control.

In essence, I believe that harnessing financial technology and cryptocurrencies in a strategic manner will allow us to assert our influence in a way that fosters freedom and economic opportunity for people around the world, while also strengthening our own position on the global stage.

We find ourselves at a critical juncture in financial matters. It’s not a question of whether digital currencies will influence the future, but rather how we adjust to this emerging landscape. To influence the direction of this transformation, the United States could adopt bitcoin as a reserve asset. The moment for decisive action is upon us, and the potential rewards for financial stability worldwide and technological advancement could be significant.

As a seasoned observer and participant in the digital currency world, I must express my personal views, which may not align with those of CoinDesk, Inc., its owners, or affiliates. My insights are shaped by years of involvement in this dynamic field, and I believe it is essential to share my unique perspective on the topics discussed herein.

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2024-12-31 20:34