President-elect Trump Names Former PayPal COO David Sacks to Lead White House AI and Cryptocurrency Initiatives

President-elect Trump Names Former PayPal COO David Sacks to Lead White House AI and Cryptocurrency InitiativesOn December 5th, President-elect Trump announced via his social media platform the appointment of David O. Sacks, former Chief Operating Officer (COO) of PayPal, to lead White House initiatives on artificial intelligence (AI) and cryptocurrency

President-elect Trump Names Former PayPal COO David Sacks to Lead White House AI and Cryptocurrency Initiatives

On December 5th, President-elect Trump announced via his social media platform the appointment of David O. Sacks, former Chief Operating Officer (COO) of PayPal, to lead White House initiatives on artificial intelligence (AI) and cryptocurrency. This marks the first time the US federal government has established a dedicated position overseeing policy for both cryptocurrency and AI, signaling a heightened focus on cryptocurrency regulation.

Trump's statement indicated that Sacks will be responsible for guiding the administration's policy development in both AI and cryptocurrency, deeming these fields crucial to America's future competitiveness. Sacks' key tasks include establishing a clear legal framework, providing definite rules and guidance for the cryptocurrency industry, thereby fostering its growth within the US.

Sacks' extensive resume and experience in the tech sector make him a suitable candidate. He served as the founding COO of PayPal, playing a pivotal role in shaping the early fintech industry. Subsequently, he founded Yammer, an enterprise social networking platform, selling it to Microsoft for $1.2 billion in 2012. He also maintains close ties to the famed "PayPal Mafia," an informal group of prominent tech figures and investors who worked at PayPal in the 1990s, including Elon Musk and Peter Thiel.

Notably, Sacks became a prominent supporter of Trump earlier this year, hosting a $50,000-per-ticket fundraiser for the then-Republican nominee at his San Francisco mansion. He further solidified his connection to Trump by speaking at the Republican National Convention in Milwaukee in July.

Sacks' appointment isn't the only pro-cryptocurrency move by the incoming Trump administration. Trump recently appointed Paul Atkins, a cryptocurrency advocate, as the next chairman of the Securities and Exchange Commission (SEC). This news sparked a strong reaction in the cryptocurrency market, with Bitcoin surging over 5.51% during the Asian trading session on December 5th, briefly reaching a record high of $101,092.4.

Since Trump's election victory on November 5th, the overall market capitalization of cryptocurrencies has increased by approximately $1.4 trillion, with Bitcoin leading the charge. This indicates a market expectation of a more positive and friendly policy toward the cryptocurrency industry under the Trump administration.

However, despite Trump and his team's strong support for cryptocurrencies, traditional financial institutions remain relatively conservative in their approach.

UBS, in an interview with Yicai Global, stated that although international relations are becoming increasingly complex in areas such as trade, currency, and sanctions, they believe the dollar's global dominance will continue for several years. UBS bases this on several factors:

First, the global monetary system is highly sticky. The dollar's dominance in financial markets and international trade means that shifts in global reserve currency status historically take a long time. Regardless of the rise and fall of economic powers, the reserve currency status often persists long after the peak of its influence. The IMF's latest survey on the composition of global foreign exchange reserves shows that central banks still hold nearly 60% of their reserves in dollars, largely unchanged over the past four years. According to SWIFT data, the dollar is used in over 47% of global payments and dominates 84% of trade finance contracts. In contrast, the euro accounts for only 23% of global payments and 6% of trade finance, while the renminbi accounts for less than 5% in both.

Second, liquidity is a primary factor for global reserve managers and international trade participants, and the dollar retains a monopoly advantage in this area. According to the latest BIS survey, the dollar accounts for a staggering 88% of all transactions. The dollar also boasts a deep derivatives market, including forwards, swaps, and options, enabling market participants to effectively hedge their exposures.

Third, US stability and security remain crucial. While the US faces challenges in its political climate and fiscal condition, other competing currency nations face similar issues. The US still ranks highly in several institutional strength metrics, including market openness, regulatory quality and efficiency, and the rule of law, continuing to attract significant foreign investment. The US-centric AI revolution is solidifying its position as a hub for innovation, further attracting foreign capital.

Of course, the US needs to cautiously manage the privilege of issuing the world's primary currency. Large fiscal deficits and recurring debt ceiling issues are eroding market confidence. Foreign investors also want assurances that the Federal Reserve's independence won't be compromised. UBS anticipates that the dollar may be well-supported in the short term, and many of Trump's early policies may benefit the dollar.

Regarding cryptocurrencies, UBS believes that while market expectations of Trump's support for digital assets have driven Bitcoin to record highs, they still consider crypto assets as speculative trading tools rather than strategic allocation assets in a portfolio. They are skeptical of meaningful and disruptive breakthroughs in the real-world application of crypto assets and believe this asset class could significantly increase portfolio volatility. Using Bitcoin as an example, UBS points out that the cryptocurrency shows a positive correlation of 0.31 with global stock indices and an annualized volatility of 78.8%. This means Bitcoin tends to move in the same direction as the market, but with significantly greater volatility. Since 2014, Bitcoin has experienced three major drawdowns of over 70%, averaging three years to recover. In contrast, UBS remains bullish on global and US equities, believing a favorable macroeconomic backdrop may further support equities.

The biggest concern for traditional institutions regarding cryptocurrencies is their extreme volatility. After Bitcoin broke the $100,000 mark on December 5th, it fell by 7% in a single trading day, dropping back below $100,000. Both the surge and subsequent drop in Bitcoin resulted in approximately 200,000 liquidations.

Beyond appointing pro-cryptocurrency cabinet members, Trump proposed during his campaign that the federal government retain ownership of its Bitcoin holdings, estimated to be around 200,000 coins, accumulated from asset seizures. Former Treasury Secretary Summers dismissed the idea of a government Bitcoin reserve, warning that reducing federal spending as planned by President-elect Trump's ally, Musk, would face political challenges. He stated that the idea that we should establish some sort of national Bitcoin reserve is just crazy, adding that there's no good reason to do so except to cater to generous special interest campaign donors. He emphasized that "it's very important to support financial innovation," but differentiated between the necessity of maintaining a national petroleum reserve and the establishment of a gold reserve at Fort Knox a century ago. He questioned, "Of all the prices that need supporting, why would the government choose to prop up a pile of Bitcoins by accumulating useless inventory?" Summers expressed strong skepticism towards the Trump administration's positive stance on cryptocurrencies.