(Updates with details on potential fund)

By Gertrude Chavez-Dreyfuss, Lisa Pauline Mattackal

WASHINGTON, March 3 (Reuters) -

U.S. President Donald Trump has given a first

glimpse

into what a U.S. cryptocurrency reserve could look like,

saying the stockpile would include bitcoin and ethereum and a

range of smaller tokens.

Trump in January signed an executive order for the creation

of a

digital asset working group

to explore the possibility of a strategic bitcoin reserve.

Trump had directed the group to turn in a report by July

addressing criteria for such a stockpile, potentially derived

from cryptocurrencies seized by the federal government.

On Sunday, he gave more details in a

post

on Truth Social of the reserve, including the tokens which

will be included.

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.

WHAT CRYPTO TOKENS WOULD BE IN THE US STRATEGIC RESERVE?

Smaller crypto tokens XRP, Solana and

Cardano would be included in the stockpile, Trump

said. That was the first indication the reserve would hold

tokens besides bitcoin.

Bitcoin and ethereum, the two largest cryptocurrencies by

market value, will be the "heart of the Reserve," Trump said in

a subsequent post.

The president gave no explanation in the post for why the

other tokens were included.

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

The exact method of creating a crypto reserve remains

uncertain. The working group was directed to evaluate

potentially deriving a stockpile from cryptocurrency seized

through law enforcement efforts.

Currently, that stands at around 198,109 bitcoin, worth about

$18.5 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 or other tokens 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.

Lawmakers in around 24 individual U.S. states, meanwhile,

have introduced legislation to create their own bitcoin

stockpiles. However, the measures have failed in four states

including Lummis' own Wyoming.

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.

The price impact would be even more pronounced for large

purchases of smaller crypto tokens like Cardano and XRP, which

generally have much lower trading volumes.

The reserve is likely to be a key topic of discussion at

the White House's upcoming cryptocurrency

summit

on March 7.