Question: Will the increasing involvement of the US government in cryptocurrencies improve or harm the adoption of cryptocurrencies in the future?

The effect of the United States government’s involvement in cryptocurrency is multifaceted. In the short term, the acceptance and promotion of digital fiat currencies by the government, like Bitcoin, will lead to greater public adoption as a currency. However, over the long term, the efforts to regulate and consolidate Bitcoin by the United States government inevitably lead to a situation where Bitcoin is worth nothing. Considering alternative cryptocurrencies like stablecoins, increased government involvement will improve the security, financial potential, and overall buy-in of cryptocurrency.

The inherent nature of Bitcoin as a decentralized digital currency inevitably leads to a Bitcoin value of zero. The supply of Bitcoin is fixed in theory at 21 million units. That number can be divisible as necessary to continue supplying units of money to all individuals. The demand story of Bitcoin is far more intriguing and is driven by two main forces. First, the convenience yield that one receives from using Bitcoin instead of the US dollar amounts to these reasons: it is an “excellent way to avoid beneficial and destructive attempts of governments to control economic activity and to grab wealth,” ransomware, laundering money, avoiding capital controls, and facilitating tax evasion.¹ Secondly, Bitcoin is a speculative investment where retail and institutional investors trade this volatile asset in the short term instead of holding on to it over the course of decades. This belief that one should invest in Bitcoin because everyone will keep investing in Bitcoin (the greater-fool theory) is paradoxical as the amount that Bitcoin is worth will eventually have to stop rising. As Cochrane points out in this simple formula, the rise of Bitcoin is due to the following criteria:¹

Convenience yield + speculative demand + limited supply + limited # of substitutes price surge + volatility.

Recently, the US government thought it prudent to establish both the Strategic Bitcoin Reserve and the United States Digital Assets Stockpile.² Currently, the best estimates weigh the Strategic Bitcoin Reserve as amounting to 198,000 Bitcoin, the equivalent of around $24 billion US dollars.³ Imagine an investor with little understanding of Bitcoin who observes the United States government aggressively stockpile and embrace Bitcoin. It makes sense for this investor to trust these actions and for them to also invest in Bitcoin. As the US government surges to the forefront of groundbreaking innovation in the crypto space and makes plans to begin acquiring Bitcoin and other cryptocurrencies, it is important to remember one of the key contributors to the demand of Bitcoin. The core aspect of the convenience yield of Bitcoin is the separation and independence it maintains from government involvement in its transactional activity. If an entity such as the United States government is able to purchase, sell, and transact with Bitcoin, it will become increasingly scrutinized and further regulated. Additionally, as Bitcoin is consolidated in large institutions like the United States, other large governments, and large investment firms, the volatility that once made Bitcoin so attractive will diminish over time. Without this volatility, short-term trading on Bitcoin will leave little room for profit and investors will be left holding an asset with zero real value. As the Bitcoin trade slows, the price surges and risk associated with its purchase and sale will disappear along with its value.

This may go without saying, but one of the arguments for the benefits of Bitcoin revolves around the ease of payments which it enables with no access to financial institutions. As of now, in the United States it is far easier to perform any normal financial transaction through a financial institution, most of which now offer an ever-growing option for digital banking through online credit, Zelle, Venmo, etc. The digital world is here, yes, and banks are adapting accordingly. Bitcoin on the other hand, is a currency that does little new for any significant and law-abiding player in the economy.

In totality, the government involvement in Bitcoin will briefly spark continued investment in this fairy-tale asset; however, over time government involvement will stabilize and consolidate Bitcoin—both of which will strip Bitcoin of its two core attractive components: currency separate from government intervention and price surges combined with volatility. Government involvement in Bitcoin will trigger greater public adoption of this asset/currency in the short term before Bitcoin inevitably plummets to zero, leaving all investors with nothing and a public adoption that is nonexistent.

Decentralized, volatile, and unregulated digital currencies like Bitcoin may drive some investors towards safer and more stable cryptocurrencies like stablecoins. The government involvement in cryptocurrency has increased throughout 2025 under the Trump administration, which intends to make the United States the “Crypto Capital of the world.” Executive orders such as the Crypto Task Force, the Strategic Bitcoin Reserve, and the United States Digital Assets Stockpile are testaments to the current administration’s intention to adopt and manage cryptocurrency as an institution.⁴ Furthermore, legislation like the GENIUS Act provides a framework for responsible regulation of stablecoins while offering a path forward for cryptocurrency companies and banks to work together.² The GENIUS Act comprises four general regulatory efforts: a reserve banking requirement, transparency and audits, anti-money laundering and sanctions compliance, and restrictions on marketing and yield.⁵ In response to the passing of the GENIUS Act, some opinions like the one below were given to justify and defend the promising future that cryptocurrency hopes to deliver. “The winners, if Congress passes this bill, are Americans who want to make payments faster and easier to access,” said Kara Calvert, the vice president for public policy at Coinbase, a cryptocurrency exchange. “It’s transformational technology, so passing this bill is a win for them. It’s not just a win for the industry or a political candidate.”⁶ In somewhat contradictory behavior, the executive administration’s disbanding of the Department of Justice’s National Cryptocurrency Enforcement Team quite clearly signifies the administration’s lack of overall concern with crypto as they instead intend to let innovation and products be produced with more freedom.⁷ Loosening restrictions and oversight in a new and complicated industry will no doubt lead to an increase in short-term investments as both retail and institutional investors hope to ride the new wave of cryptocurrency, stablecoins, and Bitcoin. While the GENIUS Act serves to provide guardrails that companies must follow, it is clear that the United States government wants to stimulate further innovation, competition, and adoption of cryptocurrencies. Stablecoins are ultimately a much different story than Bitcoin. As the government provides further regulation and safety rails for stablecoins as an asset and a currency, more investors and consumers will seek to embrace this new tool. Stablecoins, while unproven in the long run, provide an interesting new ability to hold a completely digital asset that is tied to a stable currency like the US dollar and is also backed by real-value reserve banking.⁸ The more regulation and clear frameworks the government can provide for the safe creation, dissemination, and handling of stablecoins, the more it will be adopted in the future. Whether the public adoption of stablecoins and cryptocurrency is a good or bad thing for the government and for society is not an easy question to answer at the moment. However, in this case, government involvement in stablecoins (as seen in legislation like the GENIUS Act) will legitimize these currencies and inevitably lead to further adoption of these coins. Whether or not this adoption by the public of stablecoins has a net positive or negative yield on society will be dependent on the continued regulation through legislation of the cryptocurrency arena and the stringent enforcement of any cryptocurrency company or bank to operate in a non-nefarious manner.

Footnotes

1. John H. Cochrane, “The Bitcoin Market Isn’t Irrational,” Chicago Booth Review , February 7, 2018, https://www.chicagobooth.edu/review/bitcoin-market-isnt-irrational . chicagobooth.edu

2. The White House, “Establishment of the Strategic Bitcoin Reserve and United States Digital Asset Stockpile,” Presidential Actions, March 2025, https://www.whitehouse.gov/presidential-actions/2025/03/establishment-of-the-strategic-bitcoin-r eserve-and-united-states-digital-asset-stockpile/

3. Crypto Coverage, “U.S. Government Holds 198,000 BTC Worth $24 Billion,” CryptoCoverage.co, accessed October 7, 2025, https://www.cryptocoverage.co/news/us-government-holds-198000-btc-worth-24-billion

4. The White House, “Fact Sheet: President Donald J. Trump Signs GENIUS Act into Law,” Fact Sheets, July 2025, https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-geniu s-act-into-law/

5. BBC News, “Crypto Regulation: U.S. Senate Passes Bipartisan Stablecoin Bill,” BBC News, July 2025, https://www.bbc.com/news/articles/cd78lvd94zyo

6. NBC News, “Senate Advances Major Crypto Regulation Bill in Bipartisan Vote,” NBC News, July 2025, https://www.nbcnews.com/politics/congress/senate-advances-major-crypto-regulation-bill-biparti san-vote-rcna207809

7. U.S. Securities and Exchange Commission (SEC), “Crypto Task Force,” SEC.gov, accessed October 7, 2025, https://www.sec.gov/about/crypto-task-force

8. J.P. Morgan. “What Is a Stablecoin?” J.P. Morgan Asset Management . Accessed October 7, 2025. https://am.jpmorgan.com/us/en/asset-management/institutional/insights/market-insights/market-u pdates/on-the-minds-of-investors/what-is-a-stablecoin/