How Trump Could Make Bitcoin Great Again

Not selling it may send a conflicting message to victims of cryptocurrency crime. Chinese fraud victims, for example, have previously urged the UK government to return £3 billion ($3.8 billion) in Bitcoin held by London police.

If governments truly want to protect consumers from fraud and cybercrime in cryptocurrency markets, recovering stolen Bitcoin should be part of their actions. Thus, Trump's promise to keep all of America's Bitcoin holdings may not be practical.

Besides that, Bitcoin was designed initially as a decentralized currency. Its key attraction was that it would operate independently from any central authority.

Since its inception in 2009, the degree of decentralization has decreased. A large amount of Bitcoin is now held by major mining pools – groups of miners who combine their computational resources to increase their chances of successfully“mining” new Bitcoins.

Adding significant government holdings in Bitcoin could lead to an even greater concentration of power among large players. This is probably not what most cryptocurrency users desire.

The lack of regulatory clarity is another major obstacle to the mass adoption of Bitcoin and other blockchain-based innovations. From this perspective, Trump's pro-crypto agenda could be welcomed by the crypto community, as he may create a more favorable environment in the US for cryptocurrency miners, startups and other crypto entrepreneurs.

At the Nashville conference, Trump criticized unclear and overly strict US laws, promised to fire the Securities and Exchange Commission (SEC) chair Gary Gensler who is unpopular in crypto circles for his antagonistic stance towards the industry, and warned that the crypto community would be crushed if Kamala Harris is elected.

Trump said :“We will have regulations, but from now on the rules will be written by people who love your industry, not hate your industry.” However, the specifics of how these new“crypto-friendly” regulators will achieve their goals if Trump is elected remain unclear.

In 2023, the SEC led major investigations into crypto's main troublemakers. The founder of the now-bankrupt FTX cryptocurrency exchange, Sam Bankman-Fried, for instance, was sentenced to 25 years in prison for fraud and was ordered to forfeit US$11.2 billion.

The US has the power to make the field safer for all stakeholders. But whether these anti-crime measures will continue under a new crypto-friendly government led by Trump remains uncertain.

Regardless of uncertainty about who will take office in November, there are other concerns for cryptocurrency users about government Bitcoin holdings.

Bitcoin's volatility is in part driven by governments selling their Bitcoin holdings – the price of Bitcoin has fallen by 15% since Germany started selling off approximately €2.5 billion ($2.7 billion) of confiscated Bitcoin at the beginning of June. But Bitcoin is also a highly speculative asset that is extremely sensitive to media coverage, news and even social media announcements.

The stance of the US government on Bitcoin's environmental issues, which are the subject of much media criticism, would also affect its price in the long term.

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Bitcoin mining typically uses vast amounts of computing power to solve various mathematical puzzles and add new tokens to the blockchain. It is a process that consumes an astonishing amount of electricity and water, and produces large quantities of electronic waste.

The US government had launched an initiative in January 2024 aimed at surveying the energy use of mining operations. However, the move was blocked by a federal judge in Texas who said the industry would suffer “irreparable injury” if the new requirements were imposed.

Trump's promise to support Bitcoin mining in the US may well be received negatively by communities suffering from Bitcoin's vast resource consumption. In Texas, for example, households are already facing higher electricity costs in areas where Bitcoin is mined on a large scale.

The future of Bitcoin depends on the global political agendas of key countries, including the US. But there are multiple factors driving Bitcoin's price irrespective of government regulation, so any promises should be interpreted with caution.

For Trump's pledges to affect Bitcoin's price in the long term, they must be backed by substantial and consistent measures. Otherwise, they will simply cause temporary price fluctuations like those seen over the past week.

Larisa Yarovaya is Director of the Centre for Digital Finance, Associate Professor in Finance, University of Southampton

This article is republished from The Conversation under a Creative Commons license. Read the original article .

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