US Senator Cynthia Lummis of Wyoming is doubling down on her efforts to legitimize Bitcoin and possibly add this digital asset to the country’s reserves.
In a November 21st interview, Lummis suggested that the US Federal Reserve sell some of its gold reserves to invest in the crypto. The Wyoming senator shared that the proceeds from selling a portion of gold reserves, valued at 1970 prices, can boost the US dollar and reduce the country’s growing debt.
Lummis’ announcement comes as BTC hit another all-time high and nears the $100k milestone. By pursuing a Bitcoin policy, the Federal Reserve can also benefit from higher returns.
Bitcoin is a “gold standard in digital assets, and setting up a strategic reserve can help the country’s financial strategy.
Lummis Says A BTC Reserve Can Boost USD, Reduce Debt
Lummis is one of the most outspoken supporters of Bitcoin and cryptocurrencies and pushed for the Bitcoin bill in the Senate. As a long-time crypto holder and supporter, the senator admitted owning five BTCs and putting them in a trust.
The lawmaker said that the government can adopt this strategy, start a crypto reserve, and hold these assets for at least two decades.
Explained:
The Strategic Bitcoin Reserve
Breaking down the BITCOIN act — the bill introduced by Senator @CynthiaMLummis
– Buy 1m BTC over five years – HODL for 20 years – Proof of Reserves – Protect Bitcoin property rights
TL;DR:
pic.twitter.com/snnWP59FBc
— Julian Fahrer (@Julian__Fahrer) November 19, 2024
Lummis admitted that she met with incoming US President Donald Trump about the Bitcoin proposal. Under the newest Lummis plan, the gold certificates held at a dozen Federal Reserve banks can be converted to their current fair market value. The proceeds from the sale of the certificates, pegged at 1970s prices, can be used to buy BTC.
A Look At The Proposed US Bitcoin Reserve
The planned Bitcoin strategic fund combines some long-term investment phases carried out over several years. The Treasury purchases 200k Bitcoin yearly under the Bitcoin Act 2024 for five years with at least retaining the digital assets for 20 years.
To ensure fairness and transparency, the government shall implement a Proof of Reserve System, where the government will publish audited quarterly reports. If other agencies have BTC holdings, these will be consolidated under the proposed Strategic Reserve.
A provision is also for the usage of the reserved BTC as a safe financial mechanism that will enable the agencies to use BTC as long-term assets. Moreover, the government will establish a decentralized storage network that can protect the assets against vulnerabilities and risks.
Like most financial policies, the Lummis plan has its critics. According to Avik Roy of the Foundation for Research on Equal Opportunity (FREOPP), Lummis’ suggestion to create a Bitcoin reserve will not necessarily help the country solve its debt woes.
In a speech at the North American Blockchain Summit 2024, Roy argued that the Lummis plan cannot cover the growing debt, which is now at $35 trillion.
Roy shared that a BTC reserve will be a welcome move, but the government must still implement budget reports to address the $2 trillion annual deficit. He also raised the possibility that the country may abandon its BTC reserves in the future, similar to gold’s experience in the 1970s.
Featured image from ZeroCap, chart from TradingView