Trump officially wins the presidency, and the BTC reserve competition is about to begin

Source: Mankiw Blockchain Law

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 circle. It can be foreseen that the prosperous crypto era in the United States is coming.

So, what crypto-friendly actions will the Trump team take next? Presumably, everyone's first thought is the "BTC Strategic Reserve Bill".

Whether during the campaign or recently, Trump has mentioned the Bitcoin Strategic Reserve many times. 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 only needs to be signed by Trump after he takes office to take effect.

In addition to the "White House players", some states in the United 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 stronger 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 the "pioneer" of 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 to establish a program called "Bitcoin Sovereign Strategic Reserve" (RESBit), with the goal of including Bitcoin in 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 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 official statements to clearly 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 Diet in December, which attracted great attention from the Japanese crypto community.

However, this Bitcoin reserve competition 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 even the entire crypto market.

Entry of global enterprises and institutions

Data shows that 144 companies currently hold 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 the ranks one after another, diversifying assets and resisting inflation by allocating 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 continuing to heat up their investment in Bitcoin. According to SoSoValue data on December 18, the total net inflow of Bitcoin spot ETFs on the previous day was $494 million, and net inflows have been achieved 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, Hong Kong-listed Boyaa Interactive (HK.0403) 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 begun to allocate bitcoins early.

On the other hand, mainland Chinese companies currently have few actions on Bitcoin reserves. The only one, Huabao Overseas Technology (QDII-FOF-LOF) C, still holds BTC ETF through indirect investment. Later, perhaps because of 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 Chinese policies and compliance risks. Since China's comprehensive ban on cryptocurrency-related commercial activities in 2021, companies have been directly involved in Bitcoin reserves, both 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 direct holding of 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 promoting the virtual asset service provider (VASP) licensing system, and has gradually relaxed the strong restrictions on the virtual asset industry. Against this background, 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, so as to achieve 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 feasible path. For example, Grayscale Bitcoin Trust provides institutional investors with a compliant Bitcoin investment method through a trust structure. This method can effectively avoid the policy risks brought about by direct holding of Bitcoin. However, if mainland enterprises want to participate in similar investments, they need to set up compliance entities 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, providing mainland enterprises with more options for investment 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.

Mankiw Lawyer 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 promotion of Bitcoin reserves by the new Trump administration has not only ignited the craze of the global digital asset competition, but also brought new opportunities for enterprises 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 overseas mature 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 adhere to the bottom line of law and compliance.