Over the weekend, Trump has explicitly stated that he intends to designate XRP and other digital currencies as reserve assets.
Why is Trump promoting digital currencies? What are the benefits, and how will this impact digital currency prices? Why I think the price of XRP will surge?
First, let’s analyze the direct benefits that promoting digital currencies could bring to the U.S. government:
1. Enhancing Fiscal Transparency
By improving the transparency of government expenditures, digital currencies can reduce waste and corruption, ultimately lowering the fiscal deficit.
2. Implementing Targeted Fiscal Stimulus
By bypassing the Federal Reserve, digital currencies can enable precise fiscal stimulus, ensuring that funds reach target groups more quickly and efficiently.
3. The Digitalization of the U.S. Dollar: XRP Could Replace the Petrodollar
Associating digital currencies with U.S. Treasuries can help address liquidity problems in the repo market. For example, a “XRP Collateral Pool” could be established, allowing financial institutions to use XRP as collateral for short-term liquidity access, thereby supporting the stability of the Secured Overnight Financing Rate (SOFR) market. If XRP can be used as collateral for short-term liquidity operations (e.g., in the SOFR market), it will drive substantial institutional demand for holding XRP.
Traditional Treasury transactions require at least one day for settlement, whereas XRP can enable near-instantaneous settlements, enhancing market liquidity and reducing volatility.
This would further stabilize U.S. Treasuries and facilitate the transition from Petrodollars to digital currency-backed dollars.
If such a policy is implemented, considering that XRP has a fixed total supply of only 100 billion tokens, with an even smaller circulating supply, unlike fiat currencies that can be printed indefinitely. Its price is fundamentally determined by supply and demand.
If institutions accumulate large amounts of XRP as reserves, the available circulating supply will decrease, naturally driving prices to surge.
Among all digital currencies, XRP has the highest potential to fulfill this role. Trump is likely aiming to accomplish this within his four-year term. Let’s wait and see how this unfolds.