Author | Wang Yongli, co-chairman of China Digital Information Service Group and former vice president of the bank

Source | "Foreign Exchange" Issue 1, 2025

Points

Bitcoin can only be a new type of tradable wealth or digital It is difficult for assets to become real currencies and cannot replace sovereign currencies at all. There is still a lot of doubt whether they can replace gold as a strategic reserve.

As Trump won the US presidential election, his proposed Bitcoin New Deal received widespread attention and heated discussion. There is no doubt that Trump’s new Bitcoin policy will have a significant impact on the United States and the world. The author believes that we need to calm down, view and grasp rationally and objectively, and avoid making subversive mistakes.

President-elect of the United States Trump’s radical new Bitcoin policy

During the last presidential term, Trump once believed that cryptocurrency is not a currency, its value fluctuates violently, and it is a scam. Unregulated crypto assets may be used for drug transactions and other illegal activities, and it is "a crisis that is about to happen." "The great disaster", the only real currency in the United States is the dollar. But starting in 2022, he changed his attitude, believing that the encryption industry is "the steel industry 100 years ago, and it is still in its infancy" and "Bitcoin's market value may surpass gold", and actively invests in encrypted assets, and is closely related to the cryptocurrency circle. relationship continues to strengthen.

After confirming his participation in the 2024 presidential election, Trump took a more positive attitude towards Bitcoin, claiming that he would become a president who supports innovation and Bitcoin, and proposed a very radical new Bitcoin policy, which mainly includes: The United States must become The undisputed Bitcoin mining in the world A mining powerhouse, ensure that the United States becomes the world's cryptocurrency capital and a Bitcoin superpower; ensure the power supply for Bitcoin mining, relax cryptocurrency regulation, and on the first day of taking office, he will fire the U.S. Securities and Exchange Commission (SEC), which has a strong regulatory attitude towards cryptocurrency. ) Current Chairman; Founder of Bitcoin strategic reserveAccording to the plan, more than 1 million more Bitcoins will be purchased on top of the seized Bitcoins; during his term as president, a digital dollar (CBDC) will never be launched, and the president's control over the Federal Reserve will be strengthened, etc.

These claims have been enthusiastically welcomed by the cryptocurrency community, and they have invested heavily in Trump's presidential campaign. Many of Trump’s new nominees are also crypto-friendly or even enthusiasts. Among them, Elon Musk, a strong supporter of his campaign and nominated as the leader of the newly established "Department of Efficiency", is the "godfather of the currency circle" and owns a large-scale cryptocurrency. Vice President-elect Vance has revealed that he holds hundreds of thousands of dollars worth of Bitcoin. On December 5, 2024, Trump nominated cryptocurrency supporter Paul Atkins as the successor chairman of the US SEC; nominated David Sacks, the former chief operating officer of the electronic payment company PayPal, as the new The “White House AI and Cryptocurrency Affairs” created to lead the President’s Council of Advisors on Science and Technology is dedicated to developing a legal framework so that the cryptocurrency industry can get the clarity it demands and can thrive in the United States.

Trump’s words and deeds have driven a new wave of craze in the encryption industry. After Trump was elected president on November 6, 2024, the unit price of Bitcoin rose significantly based on the previous day's closing price of less than US$69,400. By December 5, 2024, the unit price exceeded US$100,000 for the first time (the highest on that day exceeded US$104,000), and the market value exceeded US$2 trillion for the first time.

Trump’s new Bitcoin policy has also caused major shocks around the world. Changpeng Zhao (CZ), the founder of the famous cryptocurrency trading platform "Binance" who has been heavily fined by the United States, also expressed that Bitcoin is increasingly popular with investors due to its scarcity and decentralization characteristics, and is comparable to traditional financial assets. Compared with Bitcoin, it has stronger value-preserving ability. It is inevitable for countries and large institutions around the world to establish strategic reserves of Bitcoin, and competition will be very fierce. Some institutions predict that by the end of 2025, the unit price of Bitcoin will reach US$200,000. Some people believe that the unit price of Bitcoin will exceed US$1 million by 2035; in the future, 21 million Bitcoins will correspond to the value of tradable wealth in the world, and there is huge room for price growth.

Of course, Trump’s new Bitcoin policy and the above views have also caused great controversy around the world, and there are also many opposing voices in the United States. Although it is currently It seemed weak under the tide of fanaticism.

An accurate view of Bitcoin

On October 31, 2008, the Bitcoin white paper "Bitcoin Bitcoin: A Peer-to-Peer Electronic Cash System was released. On January 3, 2009, the first block of Bitcoin (the genesis block) was launched, and the first batch of 50 Bitcoins was officially released. Since then, Bitcoin has been operating safely to this day.

On May 22, 2012, someone exchanged 10,000 Bitcoins for two pizzas worth $25, becoming the first time that Bitcoin and a sovereign currency Exchange, the exchange ratio is 1:0.0025. Taking this as a starting point, the unit price of Bitcoin reaches 100,000 US dollars, and its appreciation reaches 40 million times. This has indeed made many people full of faith and expectations for the greater appreciation of Bitcoin, although the price of Bitcoin often fluctuates significantly during this process.

So, what do you think of Bitcoin? This requires at least accurate answers to the following two questions:

Question 1: Can Bitcoin become a new super-sovereign currency

Currency has a history of thousands of years in human society, mainly experiencing natural physical currencies (such as The four major development stages are shell coins), regulated metal coins (gold coins, copper coins, silver coins, etc.), metal-standard banknotes (metal-standard tokens), and pure credit currencies that are divorced from specific objects, showing a continuous shift from reality to virtuality. development trend. Among them, gold, as a currency or currency standard, has the longest history and the widest scope in the world. Especially the signing of the Bretton Woods Agreement in July 1944 brought the currency back to the gold standard at the level of the international monetary system. Therefore, gold Become the world's preferred currency material or value reserve.

But after the United States stopped fulfilling the international commitment of 1 ounce of gold to US$35 in August 1971, gold completely withdrew from the monetary stage and returned to its role as a tradable currency. The origin of wealth; currency completely withdraws from specific objects and becomes a pure measure of value and medium of exchange, which is called "credit currency". Why is this?

This is because currency serves exchange transactions, and its essential attribute and core function is the value scale and medium of exchange. For this reason, the basic value of currency must be maintained. Stability (fluctuations in currency value will seriously affect exchange transactions). And use any one or several specific physical objects as currency or moneystandard, it will inevitably fall into the increasingly serious "curse of physical currency shortage" because the physical earth's reserves, especially its limited currency supply, cannot meet the requirements of unlimited growth in the value of tradable wealth, and Seriously constraining exchange transactions and economic and social development, it will eventually be eliminated. Currency must be separated from specific physical objects, so that the total amount of currency can change with the changes in the total value of tradable wealth ("total to total" corresponds to each other). On the basis of maintaining a sufficient supply of currency, the value of the currency must be basically stable and move toward We will continue to move forward in the direction of intangibility, digitization and intelligence, continuously improve the efficiency of currency operation, reduce operating costs, strictly control risks, and give full play to the functions of currency. Therefore, credit currency is the inevitable direction of currency development, rather than the helpless result of passive acceptance under huge shocks. Any attempt to return to a metal-based currency system or to re-anchor currency will violate the nature and development laws of currency and will be difficult to succeed.

For currency, one must grasp the essence through appearances. Shell coins, mints, banknotes, etc. are all carriers or manifestations of currency, not the currency itself. The complete description of currency is: the essential attribute of currency is the value scale, the core function is the medium of exchange, and the fundamental guarantee is the highest credit protection, becoming the most liquid value certificate (transferable and circulating value warrant).

After it is no longer anchored to any specific physical object, the release of credit money requires a new channel or method. This is the way that money release institutions use credit (loan , purchase of bonds, account overdraft, bill discount, etc.) lend currency. The principle is: it is supported by the realizable value of the wealth that the borrower already owns or will own within the agreed period of time, and the currency is released after the currency issuance agency evaluates and reaches an agreement with the borrower. In this way, as long as the borrower has real tradable wealth, the money placement institution can put the corresponding currency according to its realizable value, so that the total amount of money can adapt to changes in the total value of wealth. As a result, credit currency has completely broken the "curse of physical currency shortage" and can be fully supplied, greatly promoting exchange transactions and economic and social development. It can be said that without credit, there would be no real credit currency; without credit currency, it would be difficult for economic and social development, including economic and financial globalization, to reach today's level!

In order to prevent excessive issuance of currency, credit-issued currency must repay principal and interest as agreed, and cannot be issued free of charge (this is a fiscal function). It is also necessary to establish a central bank system. The central bank no longer provides credit to the society, but only provides re-lending services to credit institutions, becoming the main body of monetary aggregate monitoring and monetary implementation. Credit lending institutions have become the new main body of money lending, but they must be strictly supervised by the central bank; credit lending institutions cannot be just one and are not allowed to lend credit to themselves.Liquidity constraints are formed through fund transfers between institutions and excessive credit is restrained. The loss of principal and interest that cannot be recovered by a credit institution becomes an actual over-issuance of currency. Loss provisions should be made in full in a timely manner or directly written off to eliminate the impact of the over-issuance as much as possible. If a credit institution encounters a liquidity crisis or becomes insolvent, it should also implement bankruptcy reorganization. It is necessary to improve the effective control mechanism of credit supply and curb excessive currency issuance from the source of currency supply.

Credit lending (including central bank re-loans) can be directly credited to the borrower's deposit account at the lending institution, and the deposits can be directly used for external payments (transfer payment accounting) Liquidation), which can greatly reduce the printing and receipt of cash. The deposit needs to be exchanged for cash only when the depositor needs the cash. Therefore, cash is no longer the basic channel for currency investment. In the long run, cash is destined to completely withdraw from the monetary stage, just like shell coins and mints.

In the case of sovereign independence, the highest credit in the world today is sovereign credit. The sovereign needs to implement bilateral protection of the currency and the wealth used for exchange in order to maintain currency and Wealth total to total correspondence. Therefore, credit currency also appears as sovereign currency or legal currency, and its credit is credit, and it is no longer the credit or liability of the money-issuing institution (such as the central bank) itself (this is the case only for metal-standard banknotes). It is difficult to succeed in promoting the decentralization of currency (including returning to physical currency), or super-sovereignty (including structurally linking with multiple sovereign currencies to create a super-sovereign currency, such as the International Monetary Fund’s Special Drawing Rights SDR). of. Stable coins that are equivalently linked to a single sovereign currency are essentially tokens of the linked currency. They can exist, but they must be subject to the supervision of the monetary authority and cannot replace the linked currency.

Although Bitcoin has achieved great innovation in technology, at the "coin" level, it highly imitates gold: the earth's reserves of gold are certain Yes, intuitively, the easier it is to dig out, the easier it will be to dig out in the early stage, and the harder it will be to dig out in the later stage, so the new production will be lower and lower. Therefore, the total number of Bitcoins is also set to 21 million, with one block every 10 minutes or so. The number of Bitcoins assigned to each block is set to: 50 in the first 4 years, and decreases every 4 years. Half (currently 3.125) will be basically reduced to zero by 2140, and mining will end. This arrangement gives people the imagination that Bitcoin will appreciate significantly, which is conducive to attracting people to actively participate in mining or investment. However, its total amount and periodic new increments are completely set by the system, which is more stringent than gold (gold It is not clear how many actual reserves there are), the amount that can be used for exchange transactions is more limited, and it cannot grow with the growth of the value of tradable wealth, which is inconsistent with the essential requirements of currency. Gold has withdrawn from the monetary stage, and it is difficult for Bitcoin to become a real currency.currency.

Bitcoin is a purely chain-derived digital asset. Its blockchain only mines coins, processes transfers between Bitcoin nodes, and distributes verification and accounting. The function is highly closed and secure, but it is difficult to solve any problems in the real world. If Bitcoin cannot be exchanged with sovereign currencies, it will be difficult to realize its value outside of the game and have an impact on the real world. The Bitcoin blockchain needs to be maintained at all times, and is getting longer and longer, and can be traced back to its source. Therefore, it is difficult to be broken or surpassed by other cryptocurrencies. However, the cost of mining coins and system operation and maintenance are getting higher and higher, and the efficiency is getting higher and higher. It is low and cannot meet the real world’s needs for currency total amount and payment efficiency. This makes it difficult for Bitcoin to become a real currency and replace sovereign currencies.

Question 2: Can Bitcoin replace gold as a strategic reserve?

Bitcoin in " The level of "coin" highly imitates gold, so it is also called "digital gold". However, Bitcoin is a purely chain-generated digital asset, not a natural physical asset. Its value depends on the development space of its application scenarios and people's beliefs and investment. Bitcoin can be divided into 1/100 millionth of a tiny unit, giving it greater payment flexibility, but it is not backed by real gold and is not strictly "paper gold". Once trust is lost, it will be wiped out and worthless, and the risks are huge. in gold.

Bitcoin is a digital asset, just like gold. In principle, its mining and trading (including spot trading, futures and derivatives trading, ETF, etc.) Not a problem unless it is explicitly prohibited due to factors such as high energy consumption and difficulty in supervision. However, as a product and trading platform that can be traded globally 7x24 through the Internet to the public, it must be subject to stricter international joint supervision to avoid illegal activities such as manipulation and fraud. Complete relaxation of regulation will definitely cause serious problems and is extremely irresponsible.

Bitcoin’s current application scenarios are mainly used for initial coin offerings (ICOs), transactions, and as a sovereign currency transfer intermediary for money laundering, bribery, and extortion. , terrorist transportation and other gray or illegal fields. Sovereign currencies originally had strict supervision and international cooperation in anti-money laundering, anti-terrorism and other aspects, but now through the transition to cryptocurrency, effective supervision has been lost. This is a very serious regulatory loophole that urgently needs the international community to attach great importance to and address it in a timely manner. clogged. The focus of supervision is not on cryptocurrencies, but on sovereign currencies, and international joint supervision must be strengthened to prevent sovereign currencies from engaging in illegal activities through cryptocurrency transactions and transfers.

Obviously, the regulatory risks of cryptocurrencies such as BitcoinThe risk is far greater than gold.

Bitcoin is essentially a speculative asset. The returns received by investors mainly come from the increase in its price, but its price fluctuates very violently, greatly exceeding that of stocks. The prices of assets such as bonds, foreign exchange, and gold fluctuate, and investment risks are very high. When engaging in Bitcoin trading or investment, except for various service providers such as exchanges, only an increasingly small number of participants can actually gain benefits. At the same time, the correlation between Bitcoin and the price trends of stocks, gold, etc. has gradually increased, and its function as a risk hedging has accordingly weakened.

Judging from the above situation, although Bitcoin seems to have more appreciation potential than gold, its risks are also greater. Whether it can replace gold as a strategic reserve remains to be seen. There are big doubts.

Trump The New Bitcoin Deal is Difficult to Achieve

First of all, it is difficult for the United States to own new Bitcoins. The total number of Bitcoins is 21 million, of which more than 19.8 million have been mined, with less than 1.2 million remaining. Mining energy consumption is getting higher and higher, competition is becoming more and more fierce, and its mining is decentralized, which is difficult for the United States to guarantee. New Bitcoins can all be generated in the United States, and it is even more difficult to ensure that they all belong to the United States. At the same time, Bitcoin is estimated to have 4 million untouchable "death coins", which are increasingly controlled by a few people. It is not easy to add another 1 million through purchase. The United States takes the lead in snapping up Bitcoin, which is bound to significantly push up the price of Bitcoin, but will also significantly increase the risk of price bubbles and plummets. In addition, the development of quantum computing technology will also cause major challenges to the security of cryptocurrencies such as Bitcoin.

Secondly, the so-called Bitcoin strategic reserve, whether it is a (financial) strategic reserve or the Federal Reserve (central bank)’s strategic reserve of the U.S. dollar, has risks and uncertainties. Certainty. If it refers to reserves, then on the basis of the more than 210,000 Bitcoins that have been seized (of which there is still a legal dispute as to whether the part taken by hackers or robbers should be returned to the victims), if one million more Bitcoins are purchased currency, will drive the price of Bitcoin to rise sharply. The current size of the U.S. Treasury Department's Exchange Stabilization Fund (ESF) is approximately US$215 billion. Even if all the ESF is used, it may not be enough. If additional debt issuance is used to raise funds, the US federal debt, which already exceeds US$36 trillion, will become even larger. There is also uncertainty in relying on Bitcoin to appreciate significantly before selling it to stabilize foreign exchange (stabilize the US dollar exchange rate) or repay debt, because large-scale transfers will drive down its price. If it refers to the Fed's reserves, ifThe Federal Reserve uses U.S. dollars to purchase millions of Bitcoins and will inject base currency on a large scale, which is entirely likely to put greater pressure on inflation. If the Federal Reserve replaces Bitcoin with gold reserves, it can weaken the impact on the base currency, but it may significantly lower the price of gold and push up the price of Bitcoin. There is also a great risk in whether it can actually benefit.

At the same time, we must also see that under credit currency, the reputation of a country's currency is fundamentally based on the country's wealth growth and currency management level. rather than relying mainly on the value of reserve assets. Therefore, replacing gold reserves with Bitcoin reserves will hardly have a practical positive impact on the US dollar, and it will also be difficult to use it to repay debts.

Once again, Trump’s new Bitcoin policy contradicts his stance of strengthening the US dollar as a key global currency. Bitcoin is decentralized and super-sovereign. Even if the United States increases its Bitcoin reserves significantly, it will not help strengthen the international status of the US dollar. On the contrary, if Bitcoin regulation is extremely relaxed, allowing large-scale cross-border flows of sovereign currencies through Bitcoin, and preventing the digital development of the US dollar, it may have a serious impact on the international status of the US dollar.

The special status of the US dollar as the international central currency is fundamentally determined by the comprehensive national strength and international influence of the United States. As the world's strongest world structure, the United States has no In the face of fundamental changes, it will be difficult to subvert or replace the US dollar's status as the number one international currency, unless the United States itself makes subversive mistakes and actively weakens the credibility and status of the US dollar. Once the international status of the US dollar is replaced, it will have a huge impact on the United States.

To sum up, Bitcoin can only be a new type of tradable wealth or digital asset. It is difficult to become a real currency and cannot replace sovereign currency at all. Can it The replacement of gold as a strategic reserve remains highly questionable. The international community should treat Trump's new Bitcoin policy calmly and objectively and not blindly follow the trend.