2024-11-18
Senator Cynthia Lummis is advocating
for the U.S. Treasury to convert a portion of its gold holdings into Bitcoin to
establish a strategic Bitcoin reserve.
The United States government has the
highest gold reserves in the world, as of the second quarter of 2024, the
United States government's gold reserves were 8,133.46 ton on its balance
sheet.
She believes converting gold held by
the US Treasury into Bitcoin would help address inflation and the national debt
without significantly impacting the government's balance sheet.
The proposal includes acquiring one
million bitcoins, or 5% of the total supply, over a set period.
This legislation proposes the
establishment of a Strategic Bitcoin Reserve to enhance the U.S. dollar's
stability and reinforce the nation's leadership in financial innovation.
Following the election of President
Donald Trump, who has expressed support for pro-crypto policies, there has been
renewed interest in the BITCOIN Act. The President's favorable stance toward
cryptocurrency has led to increased optimism about the bill's potential
advancement through the legislative process.
The BITCOIN Act represents an impro
step toward integrating digital assets into the national financial strategy,
with the goal of bolstering the U.S. economy and maintaining its position as a
leader in financial innovation.
In a groundbreaking move to establish
the United States as a leader in digital finance, Senator Cynthia Lummis (R-WY)
is championing a bill that aims to create a national strategic Bitcoin reserve
by reallocating funds from the Federal Reserve’s gold holdings.
The proposal, aligned with
President-elect Donald Trump’s pro-crypto stance, could reshape the U.S.
financial landscape but faces significant hurdles in Congress.
Details of the BITCOIN Act
Senator Lummis plans to introduce the
Boosting Innovation, Technology, and Competitiveness through Optimized
Investment Nationwide (BITCOIN) Act when the new Congress convenes next year.
The legislation calls for the U.S.
government to acquire 1 million bitcoins—roughly 5% of the total supply—at an
estimated cost of $90 billion based on current market prices. To fund this, the
bill proposes selling a portion of the Federal Reserve’s gold certificates,
which, marked to market, represent a potential $675 billion in value.
Key Provisions of the BITCOIN Act:
Strategic Bitcoin Reserve: The Act
mandates the creation of a decentralized network of secure Bitcoin vaults
managed by the U.S. Department of the Treasury. These vaults are designed to
ensure the highest levels of physical and cybersecurity for the nation's
Bitcoin holdings.
Bitcoin Purchase Program: The
legislation outlines a plan for the U.S. government to acquire up to 1 million bitcoins over a five-year period, representing approximately 5% of Bitcoin's
total supply. This initiative mirrors the scale of the country's gold reserves.
Funding Mechanism: To finance the
acquisition, the Act proposes reallocating existing funds within the Federal
Reserve System and the Treasury Department, aiming to minimize the financial
burden on taxpayers.
Protection of Private Holdings: The Act
affirms the rights of private Bitcoin holders, ensuring that the establishment
of a national reserve does not infringe upon individual financial freedoms.
“We already have the financial assets
in the form of gold certificates to convert to Bitcoin,” Lummis told Bloomberg,
emphasizing that the initiative would have a neutral impact on the U.S. balance
sheet. The Bitcoin acquired would be held for at least 20 years, with
anticipated appreciation used to reduce the national debt.
Expanding Trump’s Bitcoin Vision
The proposal builds on President-elect
Trump’s initial idea of creating a Bitcoin reserve using the approximately
200,000 bitcoins already in U.S. custody from asset seizures.
Lummis’ plan significantly expands the
scope, aiming to establish a robust reserve that she believes will enhance the
U.S. position in the global financial system.
However, some experts remain skeptical.
Jennifer J. Schulp of the Cato Institute noted that Bitcoin’s volatility could
make it a risky asset for a national reserve. "The bill asks Congress to
take a leap of faith in Bitcoin’s long-term viability,” she said.
Market Reactions and Implications
Since Trump’s election victory, Bitcoin
has surged to record highs, surpassing $93,000, driven by speculation about the
U.S. government’s potential entry into the market.
Crypto billionaire Michael Novogratz
predicted that if the U.S. establishes a Bitcoin reserve, it could push
Bitcoin’s price to $500,000, prompting other nations to follow suit.
Despite this optimism, Lummis’ bill
faces challenges. The cryptocurrency prediction market Polymarket currently
assigns just a 31% probability to Trump creating a Bitcoin reserve.
Critics point to the volatility of
Bitcoin and the legislative hurdles of selling off significant portions of
federal gold reserves.
Support Grows in Crypto-Friendly
Congress
Lummis remains hopeful, buoyed by a new
GOP Senate majority that includes crypto advocates such as Bernie Moreno, who
defeated crypto-skeptic Democrat Sherrod Brown in Ohio. The crypto industry
also poured $135 million into the 2024 election cycle, supporting candidates
from both parties who favor digital assets.
“New members like Bernie Moreno and Tim
Sheehy understand digital assets,” Lummis said. “The cavalry is arriving in
Washington.”
The BITCOIN Act is poised to spark
heated debate in the next Congress, reflecting a growing divide over how
traditional financial systems should integrate with the rapidly changing nature
of cryptocurrency.
As Bitcoin’s value soars and global
interest intensifies, the U.S. government policies can affect the future of
digital finance.
