Source: Mankiw Blockchain Law

On December 17, 2024, U.S. time, Trump announced that he had received enough votes in the Electoral College meetings of each state to officially win the presidency. Next, Trump and his Vice President Vance will be officially sworn in on January 20, 2025. This news is undoubtedly the "dating needle" for the American encryption circle. It is foreseeable that the prosperous encryption era in the United States is coming.

So, what next steps will Trump’s team take to promote encryption? Everyone’s first thought must be the “BTC Strategic Reserve Proposal”.

Whether it was during the campaign or recently, Trump mentioned the Bitcoin strategic reserve many times. The latest news shows that Trump is considering using the U.S. Treasury Department’s Exchange Stabilization Fund to establish a Strategic Bitcoin Reserve (SBR) after he takes office; in addition, the American Bitcoin Institute (a non-partisan non-profit organization) This executive order has been drafted and will only need to be signed by Trump after taking office.

In addition to the "White House contestants", 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 that would 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 Trump's new arrival will inject stronger impetus into this process.

The international trend of BTC strategic reserves

The United States’ promotion of Bitcoin reserves has not only changed its cryptocurrency landscape, but also set off a global competition for Bitcoin strategic reserves. Although countries and regions have different attitudes toward this emerging asset, they are all gradually deepening their scrutiny of the potential of Bitcoin.

In Latin America, El Salvador remains the “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 lead in 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 the "Bitcoin Sovereign Strategic Reserve" (RESBit), with the goal of including Bitcoin in 5% of international reserves.

In Europe, Poland’s Bitcoin strategic reserve proposal has attracted much attention. Polish presidential candidate Sławomir Mentzen has publicly advocated the inclusion of Bitcoin in the reserve system and plans to attract more investors through cryptocurrency-friendly regulations and taxes. While nothing concrete has yet emerged, discussions in Poland have sparked European-wide concern about Bitcoin reserves.

In contrast, Asia’s attitude appears to be more cautious. According to current media information, except Japan, other countries and regionsThere has been no official statement explicitly incorporating Bitcoin into the strategic reserve. In Japan, the discussion of Bitcoin reserves has just begun. Lawmaker Satoshi Hamada submitted a formal request to the Japanese Diet in December, sparking intense concern among the Japanese crypto community.

However, this race for Bitcoin reserves is not just limited to the Bitcoin level. Enterprises and financial institutions have also begun to enter the field of Bitcoin reserves, becoming an effective force in promoting the rise of Bitcoin and the overall encryption market.

The entry of global companies and institutions

According to data, 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 continue to increase its holdings of Bitcoin. According to data on December 16, the company has held 439,000 BTC, and the average price of each Bitcoin is US$61,725. This also means that the current profit from Bitcoin held by MicroStrategy exceeds 20 billion US dollars. This amazing record has made MicroStrategy the "leader" in 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-encryption companies such as Tesla and Block (formerly Square) have already joined the ranks and achieved asset diversification and anti-inflation by allocating Bitcoin.

Going back to this year, more companies around the world have begun to set up Bitcoin investment plans. For example, the Canadian company Jiva Technologies recently announced plans to purchase $1 million worth of Bitcoin as part of its financial strategy; the American company Marathon Digital announced an additional $1.1 billion in bitcoin; and the Japanese company Metaplanet plans to increase its holdings to 10,000 by 2025. Bitcoin.

At the same time, investment in Bitcoin by traditional financial institutions represented by BTC spot ETFs is also continuing to heat up. According to data from SoSoValue on December 18, the total net inflow of Bitcoin spot ETFs on the previous day was US$494 million, and net inflows have been achieved for 14 consecutive days.

In the global competition, Hong Kong, as the financial center of Asia, although there is no information about entering the game at the corporate level, the corporate level has already entered the game. For example, Hong Kong-listed company Boyaa Interactive (HK.0403) announced that it held 2,641 Bitcoins, and later exchanged for 515 Bitcoins, with its holdings exceeding 3,000; Nasdaq-listed company 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 allocating Bitcoin early.

On the other hand, mainland companies are currently doing very little in terms of Bitcoin reserves. The only Huabao Overseas Technology (QDII)-FOF-LOF) C, still hold BTC ETF through indirect investment. Subsequently, perhaps due to the exposure of a large number of articles on media platforms, the fund announced that it had suspended the indirect investment.

The main reason for such a sharp difference lies in the uncertainty and compliance risks. Since the comprehensive ban on cryptocurrency-related commercial activities in 2021, companies have been hindered from directly participating in Bitcoin reserves, both in terms of security and legal compliance. So, is there a solution?

Investment Strategies of Overseas Crypto Funds

Although the mainland has 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 using compliant overseas crypto funds, mainland companies may be able to find legal ways to participate in this global competition.

In the past two years, Hong Kong has gradually established a complete virtual asset compliance framework through the implementation of the Virtual Asset Service Provider (VASP) licensing system, and has also gradually relaxed its strong restrictions on the virtual asset industry. Against this background, mainland companies can choose to set up offshore funds in Hong Kong and entrust licensed digital asset management institutions to allocate assets, thereby achieving compliant Bitcoin holdings. This model not only complies with legal supervision, but also takes advantage of the Hong Kong market to prepare for potential loosening 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 risks caused by directly holding Bitcoin. However, if mainland enterprises wish to participate in similar investments, they need to establish compliance entities overseas and operate through Hong Kong or other offshore jurisdictions to ensure the legality of the source and use of funds. Likewise, this approach not only solves the legal subject problem, 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 issue of funds going abroad. The flow of cross-border funds requires strict compliance with foreign exchange management and operational transparency in the source and use of funds.

Mankiw Lawyer Summary

The significance of Bitcoin reserves has long transcended asset allocation itself. It is becoming an important chess piece in the global digital economic strategy. Trump’s new push for Bitcoin reserves not only ignited the global digital asset competition, but also brought new opportunities for companies to find new directions in the wave of the digital economy. However, for enterprises, restrictions and regulatory risks are undoubtedly a threshold that needs to be dealt with carefully.

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 allowed boundaries, companies can still find breakthroughs in this global competition and prepare for the future. The layout of the digital economy will gain more initiative. However, this process must strictly adhere to the bottom line of law and compliance.