In recent news, the United Kingdom has surpassed China to become the second-largest holder of US public debt in the world, following Japan. According to reports from the Cointribune website, the UK currently holds $779 billion in US debt, a portion of which has replaced holdings from emerging economies known as BRICS nations. On the other hand, China has dropped to the third position, holding $765 billion, while Japan remains the top holder with $1.113 trillion.
It is important to note that the increase in UK holdings of US debt is not driven by trade surpluses, unlike Japan and China. London, as a global financial hub, serves as an intermediary for many multinational corporations, some of which ultimately represent US companies.
On the contrary, China is moving in the opposite direction. After reaching a peak of $1.3 trillion in US debt holdings in 2013, China’s US dollar reserves have been steadily declining.
China’s gradual divestment in US debt reflects the escalating geopolitical tensions. The European Union has frozen Russia’s €300 billion reserves. If the US and China were to engage in conflict, how long would it take for the US to take similar actions against Beijing?
Despite China’s ongoing sales of US debt, other countries are increasing their holdings of US debt. By the end of May, foreign holdings of US debt rose by $32.4 billion, reaching a total of $9.045 trillion, marking the third consecutive month above the $9 trillion mark. Compared to the same month last year, foreign holdings of US debt have increased by 11.2%.
While BRICS nations have frequently discussed new currencies, there have been no concrete measures taken so far. It is unlikely that such a currency will emerge. On the other hand, the trading volume of Bitcoin has been consistently large, and transaction costs have been decreasing over the years.
Bitcoin is a currency without nationality, immune to freezing, and with a limited supply, positioning itself as an international currency. Consequently, the US hopes to accumulate Bitcoin ahead of other countries worldwide to hedge against a currency that could facilitate equal trade among nations.
On July 18, former President Trump signed the “Genius Act,” legislation that focuses on cryptocurrencies tied to the US dollar, marking a significant legislative milestone for the industry and indicating White House support, marking a significant turning point.
During his tenure, Trump shifted his stance in favor of the cryptocurrency industry publicly. After taking office, he prioritized artificial intelligence (AI) and cryptocurrencies as key policies, appointing David Sacks to oversee related matters. He also signed executive orders to establish a strategic Bitcoin reserve and digital asset inventory.
On March 6, Trump signed an executive order announcing the establishment of the US Strategic Bitcoin Reserve to ensure that Bitcoin held by the US government serves as a long-term strategic asset, further consolidating America’s leadership position in the global cryptocurrency arena.