- The purchase of bitcoin for a new strategic reserve would be financed partly by revaluing Federal Reserve’s gold, according to draft legislation from U.S. Senator Cynthia Lummis’s office.
- The plan proposes establishing a “Bitcoin Purchase Program” of up to 200,000 BTC a year over a five-year period, for a total of 1 million bitcoins.
- The bitcoin would be held for at least 20 years and could only be disposed of for the purpose of paying off federal debt, with no more than 10% of the assets sold during any two-year period after that.
U.S. Senator Cynthia Lummis, a Wyoming Republican, has proposed establishing a Strategic Bitcoin Reserve for the U.S. government. She announced her intention to introduce legislation for the reserve at the Bitcoin Nashville conference on Saturday.
Lummis came onstage just after former President Donald Trump endorsed using existing government bitcoin holdings to form a “strategic national bitcoin stockpile.” Trump is the Republican nominee in this year’s presidential race.
How the Reserve Would Work
According to a draft of Lummis’s bill, dubbed the “Bitcoin Act of 2024,” the Treasury Secretary would set up secure bitcoin storage facilities across the U.S. The locations would be chosen based on risk assessment, geographic diversity, security and accessibility.
The Secretary would establish a “Bitcoin Purchase Program” to buy up to 200,000 BTC per year for 5 years, totaling 1 million BTC. The bitcoin would be held for a minimum of 20 years and could only be sold to pay down federal debt. After 20 years, no more than 10% could be sold in any 2-year period.
How Bitcoin Purchases Would Be Funded
The draft bill outlines several methods to “offset the cost” of the Strategic Bitcoin Reserve:
- Setting aside $6 billion in Federal Reserve earnings from 2025-2029
- Reducing discretionary surplus funds at Federal Reserve banks
- Revaluing gold certificates held by the Fed to reflect fair market value
Revaluing the Fed’s Gold Holdings
The plan calls for Federal Reserve banks to turn in their gold certificates to the Treasury Secretary within 6 months. The Secretary would then issue new certificates within 90 days that reflect the current gold price.
The Fed banks would remit the difference in cash value between the old and new certificates to the Treasury.
This would significantly increase the stated value of the certificates. The Fed currently values its gold at the official U.S. rate of $42.22 per ounce. The market price is over 50 times higher at around $2,400 per ounce.
Conclusion
In summary, Senator Lummis aims to establish a Strategic Bitcoin Reserve funded in part by revaluing the Fed’s gold holdings to match the current market price. The legislation, if passed, would require the Treasury Secretary to set up secure storage and buy up to 1 million BTC over 5 years.
