Republican Senator Cynthia Lummis of Wyoming will seek to introduce historic legislation in the next Congress.
The legislation aims to develop a strategic Bitcoin reserve by selling portions of the Federal Reserve’s gold holdings.
This proposal would enable the US government to acquire 1 million Bitcoins (valued at around $90 billion at current prices) without impacting the national deficit. Bloomberg reported.
U.S Senator Lummis Plans to Push FED to Buy Bitcoin Reserves
This reserve aligns with President-elect Donald Trump’s pro-crypto policies, which aim to make the US the “cryptocurrency capital of the planet.” The bill dubbed the BITCOIN Act (Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide), would represent a seismic change in government policy regarding digital assets if passed.
The reserve would be maintained for a minimum of 20 years, during which any increase in Bitcoin’s value would help offset the national debt.
A Bold Financial Proposal
Senator Lummis announced the plan at the Bitcoin 2024 conference in Nashville as Trump addressed the assembly. Trump supported the concept of a Bitcoin reserve but on a smaller scale, focusing on the 200,000 tokens already confiscated by the government in asset forfeitures. Lummis’ vision goes far beyond this, proposing additional purchases funded by selling gold.
The amount involved has a “minimal impact on the US balance sheet,” Lummis said in a Bloomberg interview, adding, “We already have the gold certificates as our financial assets to convert to Bitcoin.”
The Federal Reserve’s gold holdings, officially valued at $11 billion but worth approximately $675 billion at market prices, could theoretically be used as collateral for such a transaction. However, selling large quantities of gold could drive down market prices, complicating the plan.
Market Reactions and Responses from Experts
In the week since Trump was elected, Bitcoin’s value surged past $93,000, rejuvenating the entire crypto market. The President-elect’s favourable stance on digital assets has ignited investor enthusiasm, boosting both Bitcoin and altcoin markets.
Despite this momentum, scepticism persists. Financial analysts like Jennifer J. Schulp of the Cato Institute warn that Bitcoin’s volatility and its use in long-term fiscal strategies could deter congressional support. “Bitcoin has not shown itself to be a particularly stable asset,” Schulp noted, emphasizing the risks of tying government funds to cryptocurrency.
Crypto industry leaders, including Michael Novogratz of Galaxy Digital, have questioned the proposal’s feasibility. Novogratz predicted that if the US began stockpiling Bitcoin, it could trigger global competition among nations, potentially driving Bitcoin’s price to $500,000.
The Political Scene and Crypto Advocacy
The BITCOIN Act faces significant hurdles in Congress and currently lacks co-sponsors. Nevertheless, the shifting political landscape might offer hope. Joining the newly minted GOP Senate majority are several crypto-friendly lawmakers, such as Senator-elect Bernie Moreno from Ohio, who received significant support from pro-crypto super PACs.
During the 2024 election cycle, the crypto industry invested nearly $135 million in campaigns, backing over 50 congressional candidates from both parties. This growing political influence underscores increasing support for digital assets in Washington.
Still, Lummis remains optimistic about her bill’s prospects. She referred to newly elected lawmakers who understand digital assets as “the cavalry arriving in Washington.”
A Vision for the Future
With Lummis championing this plan, the US could one-day position itself as the global leader in cryptocurrency adoption. However, the path forward is fraught with significant political, economic, and market challenges.
The debate over Bitcoin’s role in government strategy highlights the growing importance of digital assets in the global financial ecosystem. As Bitcoin’s prominence continues to rise, its potential to reshape economic policies becomes an ever more compelling topic.