Bloomberg editorial criticizes U.S. proposed Bitcoin reserve as “biggest crypto scam”

A Bloomberg editorial published recently has condemned the recent U.S. government’s plan to create a strategic Bitcoin reserve calling it a probable major scam in the cryptocurrency market. The editorial also notes that it is unclear what aims the initiative serves and that it entails certain fiscal risks for taxpayers.

The editorial notes that while conventional strategic reserves involve stocking up on products such as oil to feed the economy and protect the country’s interests, a Bitcoin reserve lacks such a purpose.

Bitcoin has been called a speculative asset with no industrial use or connection to the real economy. Its worth is solely based on market perception and as such should not be used by governments for fiscal or social planning, the article reads.

The financial risks of Bitcoin reserves

Spending the taxpayers’ money on Bitcoin may result in significant monetary loss. The editorial also claims that if the government were to fund the reserve it would have to do so by raising the national debt or by creating new money and this would stimulate inflation and weaken the value of the U.S. dollar.

Also, since Bitcoin is highly volatile and does not have a real intrinsic value, the reserve may become worthless, thus affecting taxpayers’ money in the hundreds of billions. The proposal may also have an impact on the financial structure and on the economy in general.

If banks and other financial institutions decide to take Bitcoin as collateral, a sharp decrease in its price may lead to another financial collapse that would need a bailout. This scenario shows the risks of adopting Bitcoin as a financial instrument on the institutional level.

However, the editorial notes that this may lead to the enrichment of the current Bitcoin owners and pose a high financial risk to the government. Stating, “The government, would be playing the greater fool….”

Is Bitcoin going for the centralization road?

Originally, Bitcoin was designed for the purpose of carrying out transactions outside of the control of any financial institution. According to the Editorial, the call for a government-backed Bitcoin reserve is ironic since it’s a move towards centralization.

The editorial accuses leading crypto exchanges, including Coinbase, of advocating for what essentially translates to a large handout while going against the very idea of crypto.

The Bloomberg editorial concludes that the formation of a Bitcoin reserve by the U.S. government is unwise and carries many financial risks. It submits that such a step would mainly advantage the current owners of Bitcoin while exposing taxpayers to risks.  The editorial suggests that crypto economies should not spread outside the crypto sphere to avoid risks to the national economy.