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President Trump has signed an executive order for the establishment of a federal sovereign wealth fund. The U.S. Department of Treasury and the Department of Commerce will be responsible for creating this fund. This order signals the introduction of a new investment tool in addition to existing practices.
The Federal Sovereign Wealth Fund
The sovereign wealth fund is designed to assess the increased revenues the government generates. It operates on the principle of utilizing surplus revenues derived primarily from natural resources to promote long-term economic growth and financial stability. This model, previously applied at the state level in the U.S., marks its first adaptation at the federal level.
Cryptocurrencies will not be used to support Trump’s fund. A previously signed decree for the establishment of cryptocurrency stock at the federal level was a move to “investigate the topic.” There could be scenarios in the future where cryptocurrencies are incorporated, possibly through the U.S. issuing its stablecoin and channeling its revenues into the federal wealth fund.
Potential Applications and Implementation Process
One of the proposed uses for the fund is the acquisition of the popular social media platform TikTok.
Trump: “The fund could be utilized for the acquisition of the popular social media platform TikTok.”
Details of other potential uses have not yet been disclosed, but Bloomberg reports that the fund aims to be established within the next 12 months.
This fund, provided by the government, is intended to support long-term financial stability by directing surplus revenues into various assets. Investments are anticipated in diversified areas such as global stocks, bonds, and real estate.
Many countries, including Norway, China, the United Arab Emirates, Turkey, Saudi Arabia, Singapore, Kuwait, Qatar, Australia, Russia, South Korea, and Chile, utilize sovereign wealth funds. The aim of this model is to create a buffer against economic fluctuations and contribute to sustainable growth.
The establishment of a federal sovereign wealth fund can be seen as a new approach compared to existing sector practices. Developments regarding the implementation process and the fund’s final structure are expected to be closely monitored.
