Senator Lummis wants to replenish Bitcoin reserves with gold

Republican Senator Cynthia Lummis said converting gold reserves into Bitcoin could strengthen the US government’s finances.

In an interview with CNBC, Lummis suggested that the Federal Reserve sell some of its gold reserves valued at 1970s prices and use the proceeds to buy Bitcoin (BTC).

See the clip below.

Known for his positive support for the cryptocurrency, Lummis believes that creating a strategic Bitcoin reserve could strengthen the dollar’s position as the world’s reserve currency and reduce the country’s debt burden.

He also suggested that Bitcoin approaching $100,000 could provide high returns.

Lummis explained that Bitcoin can be considered the “gold standard digital asset” and creating a strategic reserve will be an important step in its implementation.

“We have reserves, including gold certificates, at our 12 Federal Reserve banks that can be converted to current fair market value. They are kept in the books at their values ​​in the 1970s. “We then sell them for Bitcoin so we don’t need to use new dollars to create this reserve.”

Senator Cynthia Lummis

With the Trump administration’s increased interest in cryptocurrencies, Lummis said legislation for digital assets could begin to be developed in the coming years.

How does Bitcoin reserve work?

The creation of the Bitcoin Strategic Reserve Fund is a comprehensive initiative aimed at strengthening financial stability and protecting the country’s assets.

Announced: 🇺🇸 Strategic Bitcoin Reserve

Overthrowing the BITCOIN law – Bill introduced by Senator @CynthiaMLummis

– Buy 1 million BTC in five years
– HODL for 20 years
– Proof of Reserve
– Protect Bitcoin property rights

TL;DR: 🚀🚀🚀 pic.twitter.com/snnWP59FBc

— Julian Fahrer (@Julian__Fahrer) 19 November 2024

The Bitcoin Strategic Reserve will also serve as a secure financial mechanism allowing the government and other institutions to use Bitcoin as a long-term asset.

The reserve will include a decentralized storage network. The United States can protect assets from centralized risks and vulnerabilities by creating a decentralized network of secure Bitcoin storage facilities. Storage facilities will be distributed to different regions, reducing dependence on a single location.

Bitcoin purchase program

The government will implement a Bitcoin purchase program and plans to purchase 200,000 BTC per year for five years. The overall goal is to increase Bitcoin’s strategic reserve to 1 million BTC. Purchases will be made regularly to avoid sharp price fluctuations and ensure consistency.

All Bitcoins purchased will be held in reserve for at least 20 years.

Additionally, all Bitcoins currently stored in other government institutions will be transferred to the strategic reserve, allowing for centralization and efficient asset management. States can voluntarily participate in this reserve by opening separate accounts to deposit or withdraw Bitcoin assets when necessary.

The initiative will be supported because government agencies will not be able to seize or seize legally owned Bitcoin assets. This will give Americans the confidence and incentive to store their Bitcoin independently.

Bitcoin reserves will not solve the US national debt problem

Avik Roy, president of the nonprofit think tank Equal Opportunity Research Foundation (FREOPP), doubts that creating a strategic reserve in Bitcoin will help the United States overcome its debt crisis.

Speaking at the North American Blockchain Summit 2024 in Dallas, Avik Roy said Lummis’ plan will not help cover the national debt, which has already reached $35 trillion.

“Bitcoin reserve is good but it does not solve the problem. “You still need to do budget reforms to save us from a $2 trillion annual federal deficit.”

Avik Roy, president of FREOPP

According to Roy, even with a Bitcoin reserve, the United States would still need to implement budget reforms to save the country from a $2 trillion annual federal deficit.

The political scientist stated that the BTC reserve could reduce the tension in the bond market by making the USA feel that it is not bankrupt. Roy is also concerned that the United States could give up its BTC reserves in the future, similar to what happened with gold in the 1970s.

Argument against Lummis

As a reserve asset, Bitcoin poses many other challenges, the biggest of which is volatility. Bitcoin’s price fluctuations make it a risky reserve asset compared to stable options like gold.

After all, Bitcoin has experienced many significant crashes throughout its history.

In June 2011 Mt. Gox exchange was hacked. Bitcoin’s price dropped from $32 to $0.01 in a single day, a collapse of almost 99.9%. December 2017 – February 2018: After reaching a peak of nearly $20,000, Bitcoin lost more than 56% of its value within months. March 2020: During the onset of the COVID-19 pandemic, the price of Bitcoin dropped approximately 46% in less than a month, falling from $10,300 to approximately $5,600. May 2021: Bitcoin drops from $58,000 to $34,700, a drop of over 40% in two weeks. November 2022: Following the FTX exchange crash, Bitcoin fell 14% in a short time

Bitcoin is also often associated with illegal activities and clandestine purchases, raising concerns about integrating Bitcoin into national financial systems. Critics say it could also allow countries like Russia to bypass international sanctions, undermine global financial stability and create geopolitical tensions.

Trump’s crypto advisory board will create promised reserve

As Reuters reports, a number of cryptocurrency companies, including Ripple, Kraken, and Circle, are seeking a seat on President Donald Trump’s promised crypto advisory board. They are willing to join his plans to overhaul US policy.

During his campaign at a Bitcoin conference in Nashville in July, Trump promised to create a new council as part of his pro-crypto administration. Trump’s team is discussing how to organize the council, how to determine the number of staff and which companies should be included in the council.

Potential members include venture capital firm Paradigm and venture giant Andreessen Horowitz’s crypto arm, known as a16z.

“This is being fleshed out, but I expect leading executives of America’s bitcoin and crypto companies to be represented.”

David Bailey, CEO of Bitcoin Magazine

According to sources, the team is expected to advise on digital asset policy, work with Congress on cryptocurrency legislation, create the Bitcoin reserve promised by Trump, and cooperate with institutions such as the Securities and Exchange Commission, Commodity Futures Trading Commission and Treasury. Department. Law enforcement officials and former lawmakers may also be on the board, a source said.