China remains unperturbed by the United States’ launch of a national cryptocurrency reserve, despite growing speculation over its potential influence on global digital asset markets, analysts have said.
US President Donald Trump signed an executive order on Thursday to establish the “Strategic Bitcoin Reserve” and “US Digital Asset Stockpile.” The initiative aims to “maximise its strategic position” using assets already held by federal government agencies. The move comes ahead of the White House Crypto Summit, where Trump is set to outline further details in a speech to investors and CEOs.
The reserve will be capitalised with cryptocurrency units owned by the US Department of Treasury, primarily those seized through criminal or civil forfeiture proceedings. The announcement immediately impacted the market, with Bitcoin prices dropping by around 5% from an early-morning high on Thursday.
A Strategic Play for the US
Winston Ma, an adjunct professor on the digital economy at New York University, believes the US is leveraging its dominant position in cryptocurrency markets to strengthen the dollar’s influence in global trade.
“The US is the leading market for crypto assets and will get bigger,” Ma said, suggesting that a sufficiently large reserve could bolster the dollar’s role in international trade, especially among third-party nations.
Some analysts speculate that US officials might use the reserve as a hedge against inflation and economic volatility. A report from American tech platform Built In noted that profits generated from government-held cryptocurrencies could potentially boost the dollar’s value.
Despite these projections, experts remain cautious about the reserve’s broader economic impact. Song Seng Wun, an economic adviser at Singapore-based CGS, downplayed the potential ramifications, stating that “the reserve will affect neither the inflation nor economic growth of any country.” However, he acknowledged that it could influence cryptocurrency markets, saying, “Those reserve cryptos will soar and then crash, and the cycles repeat.”
The S&P Cryptocurrency Broad Digital Market Index has already seen a 23.7% decline since its all-time high on December 17, while the S&P Bitcoin Index has dropped 15.2% from its peak on the same day.
China’s Calculated Approach
While the US move has sparked global debate, China appears steadfast in its strategy. The country has taken a cautious stance on cryptocurrency markets since banning mass-market digital asset trading and mining activities in 2017. Authorities argue that these activities pose risks to financial stability and could be exploited for illicit purposes.
Despite this ban, China has championed advancements in blockchain technology. Since 2019, public and private entities have integrated blockchain into remittances, cross-border settlements, and other financial applications. Analysts say this approach reflects Beijing’s commitment to technological innovation while maintaining strict oversight of digital assets.
“In China, there is a consistent policy to encourage, promote, and guide new digital technologies in real industry applications,” Ma noted. “The policy is to integrate digital technology into industries like manufacturing.”
Stephen Pau, chief investment officer at Guangzhou-based Hefeng Family Office, echoed this sentiment, suggesting that the US move represents a “correction” rather than a fundamental shift. He indicated that his firm might increase its cryptocurrency holdings if prices dip further.
“Our crypto exposure is currently a very small allocation within our portfolio,” Pau said. “We believe that more corporations will allocate resources to crypto in the future.”
A Defining Moment for Global Crypto Markets
As the White House Crypto Summit unfolds, market participants will be closely monitoring Trump’s remarks. However, some industry professionals remain skeptical about its immediate impact.
“I think tonight’s summit is unlikely to reverse the current downtrend in crypto assets, so I won’t hold my breath for Trump’s comments,” said Steven Wu, a Hong Kong-based investor in global assets.
With China maintaining a firm grip on digital financial regulation and the US seeking to assert dominance in the crypto sphere, the landscape of digital assets continues to evolve. The establishment of a US cryptocurrency reserve may set a precedent for other nations, but for now, China appears confident that its safeguards will shield it from any potential ripple effects.
