WASHINGTON (Reuters) - President Donald Trump ordered the creation of a digital asset working group on Thursday which, among other things, would be tasked with exploring a U.S. cryptocurrency stockpile.

He has directed the group, by July, to turn in a report addressing criteria for such a stockpile, potentially derived from cryptocurrencies seized by the federal government.

Some market participants were disappointed Trump did not immediately begin accumulating a bitcoin strategic reserve.

Here are some of the issues at hand:

WHAT IS A STRATEGIC RESERVE?

A strategic reserve is a stock of a critical resource that can be released at times of crisis or supply disruptions. The best-known example is the U.S. Strategic Petroleum Reserve, the world's largest supply of emergency crude oil, which was created by an act of Congress in 1975 after a 1973-74 Arab oil embargo throttled the U.S. economy. Presidents have tapped the stockpile to calm oil markets during war or when hurricanes hit oil infrastructure along the U.S. Gulf of Mexico.

Canada has the world's only strategic reserve of maple syrup, while China has strategic reserves of metals, grains and even pork products.

HOW WOULD A U.S. STRATEGIC BITCOIN RESERVE WORK?

Trump's Thursday order shed little light on the scope or structure of what may be under consideration. The working group was directed to evaluate potentially deriving a stockpile from cryptocurrency seized through law enforcement efforts.

Currently, that stands at around 200,000 tokens, worth about $21 billion at market prices, according to bitcointreasuries.net. It remains unclear what the legal process would be for moving them out of the Justice Department.

Trump has not said if the government would add to that stockpile by buying more bitcoin in the open market and the order offers no further specific instructions.

The most concrete bitcoin reserve proposal circulating in Washington comes from pro-crypto Republican Senator Cynthia Lummis, who personally holds five bitcoins.

In July she introduced a bill, yet to gain traction, that would create a reserve operated by the Treasury.

The bill envisages that the Treasury would create a program to buy 200,000 bitcoins annually for five years until the stockpile hit one million tokens. This would represent about 5% of the total global supply of bitcoin of around 21 million. The Treasury would fund the purchases with profits on Federal Reserve banks' deposits and gold holdings.

The bitcoin reserve would subsequently be maintained for a minimum of 20 years.

WHAT ARE THE BENEFITS OF A BITCOIN RESERVE?

In a July speech, Trump suggested a bitcoin reserve would help the U.S. dominate the global bitcoin market in the face of growing competition from China.

Other proponents argue that by holding a stockpile of bitcoin, which they say is likely to continue appreciating over the long term, the U.S. could reduce its deficit without raising taxes, strengthening the U.S. dollar.

In November, Lummis told Fox Business that her plan would allow the United States to cut its debt in half in 20 years. "What that does is help us protect ourselves against inflation and protect the U.S. dollar on the world stage," she said.

A strong dollar would in turn give the United States more leverage over foreign adversaries like China and Russia, proponents say.

WHAT ARE THE RISKS?

Crypto skeptics say that, unlike most other commodities, bitcoin has no intrinsic use and is not crucial to the functioning of the U.S. economy.

Created in 2008, bitcoin remains too young and volatile to presume its value will continue to rise in the long term, while crypto wallets remain notoriously vulnerable to cyber attacks, they also argue. And given its volatility, any government purchases or sales could have an outsized impact on bitcoin's price.