Donald Trump’s Sovereign Wealth Fund: Will Bitcoin & Ethereum Be Included

Introduction

On February 3, 2025, U.S. President Donald Trump signed an executive order establishing the country’s first sovereign wealth fund (SWF), signaling a shift in national economic strategy. The creation of this government-owned investment fund has sparked discussions on asset allocation, particularly regarding the potential inclusion of digital assets like Bitcoin and Ethereum. This article explores the implications of incorporating cryptocurrencies into the fund, weighing the benefits, risks, and global trends that may shape this decision.

The Evolution of Sovereign Wealth Funds

Sovereign wealth funds are state-owned investment pools typically used to manage surplus reserves from trade, natural resource revenue, or foreign exchange holdings. Countries such as Norway, China, and the United Arab Emirates have built massive SWFs to ensure financial stability and generate returns for future generations. Historically, these funds have prioritized traditional assets such as equities, bonds, and real estate. However, with the rise of alternative investments, digital assets like Bitcoin and Ethereum have entered the conversation as potential holdings for SWFs.

The U.S. Sovereign Wealth Fund and Speculation on Crypto Inclusion

The establishment of a U.S. sovereign wealth fund under President Trump has fueled speculation on whether Bitcoin and Ethereum will be included. While the executive order does not explicitly mention digital assets, financial analysts suggest that the administration might leverage the fund to acquire Bitcoin in a streamlined manner. According to Austin King, a financial expert, the government might aim “to acquire Bitcoin without the bureaucracy,” reinforcing the possibility of cryptocurrency inclusion.

Adding to this speculation, the appointment of Howard Lutnick, a known Bitcoin advocate, to oversee the fund has further amplified discussions. Lutnick’s involvement suggests that digital assets could play a role in the fund’s long-term investment strategy.

President Trump’s Changing Stance on Cryptocurrencies

President Trump has had a complex relationship with cryptocurrencies. In 2019, he was openly critical, stating, “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.” However, his stance has evolved. During the 2024 presidential campaign, Trump became the first presidential candidate to accept digital assets as donations. Additionally, he proposed the creation of a federal Bitcoin reserve, which could be sourced from assets seized from criminals or through new acquisitions.

This shift in position has led to increased speculation that Bitcoin and Ethereum could find a place within the U.S. sovereign wealth fund.

The Case for Bitcoin and Ethereum in Sovereign Wealth Funds

The inclusion of Bitcoin and Ethereum in sovereign wealth funds could provide several strategic advantages:

1. Diversification Benefits

Cryptocurrencies have demonstrated low correlation with traditional assets, making them a potential tool for diversification. By including Bitcoin and Ethereum, the U.S. SWF could mitigate risks associated with traditional market fluctuations.

2. Hedge Against Inflation

Bitcoin’s fixed supply of 21 million coins makes it an attractive hedge against inflation. As fiat currencies face devaluation risks, holding Bitcoin could provide a store of value, similar to gold.

3. Geopolitical and Economic Strategy

Bitcoin and Ethereum operate outside the traditional financial system, making them less vulnerable to geopolitical risks. Countries looking to reduce reliance on the U.S. dollar or navigate financial sanctions may view cryptocurrencies as strategic assets.

4. Innovation and Technological Advancement

Including digital assets in SWFs signals a commitment to financial modernization. Governments that embrace blockchain technology and cryptocurrencies could position themselves at the forefront of global economic innovation.

Concerns and Challenges

Despite the potential advantages, several concerns must be addressed before Bitcoin and Ethereum can be included in the U.S. sovereign wealth fund:

1. Volatility Risks

Bitcoin and Ethereum have historically exhibited extreme price volatility. While this can lead to high returns, it also introduces significant risk, which could be problematic for a government-managed investment fund.

2. Regulatory and Legal Uncertainty

Cryptocurrency regulation varies across jurisdictions, and the legal framework surrounding digital assets remains unclear. The U.S. government would need to establish clear guidelines to ensure compliance and mitigate legal risks.

3. Security and Custody Issues

Unlike traditional assets, cryptocurrencies require specialized storage solutions. Ensuring the security of Bitcoin and Ethereum holdings would necessitate robust custody mechanisms, possibly involving third-party custodians or government-managed cold storage.

4. Public Perception and Political Risks

The speculative nature of cryptocurrencies has led to skepticism among policymakers and the public. Critics argue that taxpayer funds should not be invested in highly volatile assets, as this could undermine trust in the sovereign wealth fund’s management.

Global Trends: Other Nations Exploring Bitcoin Reserves

The United States is not alone in considering the role of cryptocurrencies in national reserves. Other countries have taken steps to incorporate Bitcoin into their economic frameworks:

Czech Republic’s Central Bank Proposal

Aleš Michl, the governor of the Czech National Bank, has proposed allocating up to 5% of the country’s €140 billion reserves to Bitcoin. This move reflects a growing recognition of Bitcoin’s potential as a hedge against financial instability.

El Salvador’s Bitcoin Experiment

In 2021, El Salvador became the first country to adopt Bitcoin as legal tender. The government has since accumulated Bitcoin in its national reserves, despite criticism from international financial institutions.

Middle Eastern and Asian Interest

Sovereign funds in regions like the Middle East and Asia, including the UAE and Singapore, have shown increasing interest in blockchain investments. Some funds have already invested in cryptocurrency-related infrastructure, setting a precedent for potential Bitcoin and Ethereum holdings.

The Road Ahead: Key Considerations

As the U.S. sovereign wealth fund takes shape, several factors will determine whether Bitcoin and Ethereum are included:

1. Regulatory Clarity – The government must establish clear guidelines on how cryptocurrencies can be legally integrated into SWFs.
2. Risk Management Strategies – Policies must be developed to address the volatility and security risks associated with digital assets.
3. Public and Political Consensus – Broad support will be essential for legitimizing Bitcoin and Ethereum as national reserve assets.
4. Institutional Adoption Trends – If major financial institutions and central banks continue adopting cryptocurrencies, sovereign wealth funds may follow suit.

The establishment of a U.S. sovereign wealth fund marks a pivotal moment in financial history. While the potential inclusion of Bitcoin and Ethereum offers significant benefits in diversification, inflation hedging, and innovation, it also presents challenges related to volatility, regulation, and public perception. As governments and financial institutions navigate this evolving landscape, the future of digital assets in sovereign wealth funds remains uncertain. However, the growing interest in cryptocurrencies suggests that their role in national reserves could expand in the years to come.