DeFi Users Tap Liquidity as Trump Launches US Crypto Reserve

US President Donald Trump introduced that XRP, Cardano (ADA), Solana (SOL), Bitcoin (BTC), and Ethereum (ETH) could be a part of a US crypto reserve.

He identified on Fact Social that the reserve would “elevate the essential trade after years of corrupt assaults by the Biden Administration,” assuring the US would turn out to be the world’s crypto capital.

Initially, he solely talked about XRP, SOL, and ADA as belongings forming the reserve, so members of the BTC and ETH group had been unpleasantly stunned that the 2 greatest cryptocurrencies by market cap wouldn’t be a part of it. Round an hour after his first publish, he clarified that worthwhile cryptos like BTC and ETH could be “on the coronary heart of the reserve.”

Trump started discussing the idea of a strategic crypto reserve throughout his presidential marketing campaign final yr. After he took workplace, he signed an government order to assessment the prospects of constructing the reserve.

Nonetheless, the order didn’t explicitly mandate its formation. A digital asset working group was tasked with assessing the feasibility of a “digital asset stockpile,” which isn’t the identical as a reserve. On March 2, Trump instructed the group to formally set up the reserve.

Behind the asset choice

XRP, ADA, SOL, BTC, and ETH had been chosen as a result of distinctive advantages they bring about to finance. Sometimes called the “digital gold,” Bitcoin has established itself as a retailer of worth and a hedge towards inflation.

Ethereum’s good contract capabilities have reworked decentralized finance. XRP’s effectivity and pace make it worthwhile in international transactions, whereas Cardano’s scientific method to blockchain expertise provides a layer of utility and credibility. With low charges and high-speed transactions, Solana enhances blockchain scalability.

A sequence of posts on X hyperlink Elon Musk’s closeness to Trump to the prospect of Dogecoin (DOGE) becoming a member of the strategic reserve sooner or later.

Following the announcement, all 5 cryptocurrencies talked about skilled vital worth surges, contributing to a world crypto market rally of $300 billion. On March 3, the worldwide crypto market cap reached $3.05 trillion, a 7.14% enhance over the earlier 24 hours, and nearly all the high 100 had been within the inexperienced.

A watershed second: Use of non-smart contract belongings in DeFi

Few earlier bulletins have legitimized cryptocurrencies for retail buyers to this extent. When the federal government begins holding digital belongings, confidence of their long-term viability will enhance.

Regulation might probably stabilize the market. As authorities endorsement reduces perceived dangers for the typical client, companies accepting crypto funds may even see mainstream adoption.

The profitable new funding alternatives embody the usage of non-smart contract belongings like Bitcoin and XRP in DeFi functions, resembling cross-chain yield farming, collateral for DeFi loans, decentralized buying and selling, and so forth.

The Layer-1 blockchain Flare Community, which was designed for data-intensive use circumstances and powers on-chain monetary options for high-value belongings, is uniquely positioned on this new context.

Its FAssets system will allow belongings like BTC and XRP to work together trustlessly with good contracts on the community through collateralized minting, utilizing Flare Time Sequence Oracle and Flare Knowledge Connector for safe cross-chain performance.

In response to the president’s announcement, Flare reminded the X community of the upcoming FAssets v1 mainnet launch, which can allow the community to unlock capital inside and past DeFi.

This will probably be attainable through trust-minimized bridging for non-smart contract belongings like BTC, XRP, and DOGE. DeFi dApps supporting liquid restaking and denominated perpetuals are impending as properly.

Holders of BTC, XRP, or DOGE can convert these belongings to FAssets and participate in yield farming methods on DeFi platforms, incomes yield in methods which might be not possible on the unique blockchains. They don’t must promote their holdings to unlock liquidity.

As a substitute, they will use their FAssets as collateral to take out crypto- or stablecoin-based loans on Flare-based lending protocols. An alternative choice is buying and selling FAssets on decentralized exchanges inside the Flare ecosystem.

How does it work?

FAssets system brokers present over-collateralized belongings (300%+) to facilitate minting and redemption. A system liquidator displays agent collateralization ranges to verify the system stays safe and trustless.

XRP brokers should deposit 500 XRP into the proprietor’s XRP tackle, and Bitcoin brokers should maintain 0.005 BTC or extra within the proprietor’s Bitcoin tackle to cowl the potential transaction charges.

The person account requests minting, which is adopted by verification. Options resembling KYC compliance and TEE-enabled effectivity and safety facilitate the adoption of XRPFi merchandise, amongst others.

The agent account locks the collateral, and the non-smart contract community transfers belongings from the person to the agent’s account. The agent submits a minting request to FAssets. The system mints and sends FAssets to the person account. Customers leverage the belongings in varied DeFi functions, unlocking further incomes alternatives.

As of February 2025, Flare’s TVL was over $80 million, a rise of 410% in comparison with a worth of $15.92 million a yr earlier. Liquid staking and real-world belongings account for over half (56%) of Flare’s TVL, exhibiting robust demand for versatile staking and yield-bearing choices.

Incremental will increase in minting caps will facilitate liquidity because the mainnet launch approaches. As soon as the mainnet turns into a truth, DeFi customers will entry the liquidity of trillion-dollar markets. Bitcoin’s market cap alone is $1.66 trillion, and XRP has a market cap of $153.84 billion.

Admittedly, questions stay. The US authorities has but to element the mechanisms for buying and managing reserve cryptocurrencies. It’s additionally unclear whether or not it’s going to purchase Bitcoin throughout worth dips within the footsteps of El Salvador and if or when the reserve will develop to incorporate different cryptocurrencies or stablecoins.

Among the particulars will probably be ironed out on the first-ever cryptocurrency summit on the White Home on March 7, which the president will host. The summit is organized by David Sacks, White Home AI and Crypto Czar.

He’s a restricted associate of Multicoin Capital, which holds investments in SOL. In a 2021 interview, Sacks stated he was “hodling” SOL, the blockchain’s native token. He reportedly bought all of his crypto holdings earlier than becoming a member of the Trump administration.