Article reprinted from: Mankiw Blockchain
On December 17, 2024, US time, Trump announced that he had received enough votes in the state electoral college meetings and officially won the presidency. Next, Trump and his Vice President Vance will be officially sworn in on January 20, 2025. This news is undoubtedly the "stabilizing force" of the US crypto community. It can be foreseen that the prosperous crypto era in the United States is about to come.
So, what crypto-friendly moves will the Trump team make next? I’m sure everyone’s first thought is the “BTC strategic reserve proposal”.
Trump has mentioned the Bitcoin strategic reserve many times, both during the campaign and recently. The latest news shows that Trump is considering using the US Treasury's Exchange Stabilization Fund to establish a strategic Bitcoin reserve (SBR) after his inauguration; in addition, the US Bitcoin Policy Institute (a non-partisan non-profit organization) has drafted this executive order, which will take effect as long as Trump signs it after his inauguration.
In addition to the "White House candidate", some US states have also begun to take frequent actions on Bitcoin reserves. Several states, including Texas and Pennsylvania, have proposed specific bills to try to support fiscal stability by accepting Bitcoin taxes or establishing local Bitcoin reserves. These measures indicate that the United States is paving the way for the actual operation of Bitcoin reserves, and the arrival of the new Trump administration will inject more momentum into this process.
International trend of BTC strategic reserves
The United States' promotion of Bitcoin reserves has not only changed its domestic cryptocurrency policy landscape, but also set off a global competition for Bitcoin strategic reserves. Although governments and regions have different attitudes towards this emerging asset, they are gradually deepening their scrutiny of Bitcoin's potential.
In Latin America, El Salvador remains a "pioneer" in global Bitcoin reserves. Since declaring Bitcoin as legal tender in 2021, El Salvador has continued to accumulate Bitcoin reserves. The latest data shows that El Salvador's Bitcoin holdings have exceeded 5,950 BTC. Recently, Brazil is following El Salvador's pace and exploring the establishment of a strategic Bitcoin reserve. In November 2024, Brazilian Federal Congressman Eros Biondini proposed a bill proposing the establishment of a program called "Sovereign Strategic Reserve of Bitcoin" (RESBit), with the goal of incorporating Bitcoin into 5% of the country's international reserves.
In Europe, Poland's Bitcoin strategic reserve proposal has attracted much attention. Polish presidential candidate Sławomir Mentzen publicly advocated the inclusion of Bitcoin in the national reserve system and plans to attract more investors through cryptocurrency-friendly regulations and tax policies. Although no specific policies have been formed yet, Poland's discussion has already aroused attention to Bitcoin reserves across Europe.
In contrast, Asia's attitude appears more cautious. According to current media reports, except for Japan, other countries and regions have not yet made an official statement to include Bitcoin in the national strategic reserve. In Japan, the government's discussion on Bitcoin reserves has just started. Legislator Satoshi Hamada submitted a formal request to the Japanese parliament in December, which attracted great attention from the Japanese crypto community.
However, the competition for Bitcoin reserves is not limited to the national level. Enterprises and financial institutions have also begun to enter the field of Bitcoin reserves, becoming a vital force driving the rise of Bitcoin and the entire crypto market.
Global companies and institutions enter the game
Data shows that there are currently 144 companies holding Bitcoin. In fact, corporate holdings of Bitcoin are not news this year.
As early as 2020, MicroStrategy, an American company, has begun to continuously increase its holdings of Bitcoin. According to data on December 16, the company already holds 439,000 BTC, with an average price of $61,725 per Bitcoin. This also means that the current profit of Bitcoin held by MicroStrategy exceeds $20 billion. This amazing record has made MicroStrategy the "leader" of corporate investment in Bitcoin, and its purchase and holding strategy has also provided a reference for other traditional companies to explore digital asset reserves. In addition to MicroStrategy, pro-crypto companies such as Tesla and Block (formerly Square) have also joined this ranks one after another, realizing asset diversification and inflation resistance through the allocation of Bitcoin.
Back to this year, more companies around the world have begun to set up Bitcoin investment plans. For example, Canadian company Jiva Technologies recently announced plans to purchase $1 million worth of Bitcoin as part of its financial strategy; American company Marathon Digital announced an additional $1.1 billion in Bitcoin; Japanese company Metaplanet plans to increase its holdings to 10,000 Bitcoins by 2025.
At the same time, traditional financial institutions represented by BTC spot ETFs are also investing more in Bitcoin. According to SoSoValue data on December 18, the total net inflow of Bitcoin spot ETFs on the previous day was US$494 million, and net inflows have continued for 14 consecutive days.
In the global competition, Hong Kong, as the financial center of Asia, has already entered the market at the corporate level, although there is no information about its entry at the government level. For example, Boyaa Interactive (HK.0403), a Hong Kong-listed company, announced that it holds 2,641 bitcoins, and then exchanged for 515 bitcoins, with its holdings exceeding 3,000 bitcoins; Nasdaq-listed Nano Labs (Nasdaq: NA) recently announced plans to invest $50 million in BTC asset allocation. Previously, listed companies such as Guofu Innovation and Coolpad Group had also started to allocate bitcoins early.
On the other hand, Chinese mainland companies have made few moves in Bitcoin reserves. The only one, Huabao Overseas Technology (QDII-FOF-LOF) C, still holds BTC ETF through indirect investment. Later, perhaps due to the exposure of a large number of articles on media platforms, the fund announced the suspension of the indirect investment.
The main reason for such a sharp difference is the uncertainty of China's policies and compliance risks. Since China completely banned cryptocurrency-related commercial activities in 2021, companies directly participating in Bitcoin reserves have encountered many obstacles in terms of security and legal compliance. So, is there a solution?
Investment strategies of overseas crypto funds
Although mainland policies have set many restrictions on directly holding Bitcoin, this does not mean that mainland companies are completely excluded from the Bitcoin reserve competition. In fact, by setting up offshore funds in Hong Kong or relying on compliant overseas crypto funds, mainland companies may find a legal way to participate in this global competition.
In the past two years, Hong Kong has gradually established a sound virtual asset compliance framework by implementing the Virtual Asset Service Provider (VASP) licensing system, and has gradually relaxed strong restrictions on the virtual asset industry. In this context, mainland Chinese companies can choose to set up offshore funds in Hong Kong and entrust licensed digital asset management institutions to carry out asset allocation, thereby achieving compliant Bitcoin holdings. This model not only complies with legal supervision, but also takes advantage of the policy advantages of the Hong Kong market and prepares for potential policy relaxation in the future.
In addition to the Hong Kong market, mature overseas crypto funds are also a viable path. For example, Grayscale Bitcoin Trust provides institutional investors with a compliant way to invest in Bitcoin through a trust structure. This method can effectively avoid the policy risks brought about by directly holding Bitcoin. However, if mainland companies want to participate in similar investments, they need to establish a compliant entity overseas and operate through Hong Kong or other offshore jurisdictions to ensure the legality of the source and use of funds. Similarly, this path not only solves the problem of legal entities, but also provides greater operational flexibility.
In addition, in recent years, traditional financial institutions including Fidelity and BlackRock have launched Bitcoin spot ETFs and other crypto asset investment products. These funds provide institutional investors with a transparent and legal way to hold Bitcoin, and provide more options for mainland companies to invest through overseas entities. However, this model also needs to solve the compliance problem of capital outflow. The flow of cross-border funds must strictly comply with China's foreign exchange management policies and ensure the transparency of the source and use of funds in operations.
Attorney Mankiw's Summary
The significance of Bitcoin reserves has long surpassed asset allocation itself, and it is becoming an important chess piece in the global digital economy strategy. The new Trump administration's promotion of Bitcoin reserves has not only ignited the craze for global digital asset competition, but also brought new opportunities for companies to find new directions in the wave of digital economy. However, for Chinese companies, policy restrictions and regulatory risks are undoubtedly a threshold that needs to be handled with caution.
By setting up offshore crypto funds in Hong Kong or investing in regulated mature overseas crypto funds, and making full use of compliance paths within the boundaries allowed by policies, Chinese companies can still find a breakthrough in this global competition and gain more initiative for the future digital economy layout. However, this process must strictly abide by the bottom line of law and compliance.
