New Bill Proposes U.S. Bitcoin Reserve Funded by Fed’s Gold Revaluation

U.S. Senator Cynthia Lummis has introduced a plan to create a new Strategic Bitcoin Reserve. This reserve would be partially financed by revaluing gold certificates held by the Federal Reserve System. 

Lummis, a Republican from Wyoming known for her favorable stance on Bitcoin, unveiled this proposal on Saturday at the Bitcoin Nashville conference. She took the stage just after former U.S. President Donald Trump, the Republican nominee in this year's presidential race, delivered a speech on blockchain policy to an enthusiastic crowd of 8,500 people.

During his speech, Trump endorsed using the U.S. government's existing Bitcoin holdings as the foundation of a new “strategic national bitcoin stockpile.” These holdings have primarily been acquired through forfeitures and seizures related to criminal cases.

The draft bill, tentatively titled the “Bitcoin Act of 2024,” outlines several key provisions. The Treasury Secretary would be responsible for establishing a decentralized network of secure Bitcoin storage facilities across the United States. The locations for these vaults would be selected based on a comprehensive risk assessment, prioritizing factors such as geographic diversity, security, and accessibility.

Additionally, the Treasury Secretary would initiate a “Bitcoin Purchase Program.” This program aims to acquire up to 200,000 BTC annually over a five-year period, totaling 1 million BTC. According to the draft, this Bitcoin would be held for a minimum of 20 years and could only be sold to pay off federal debt. After the initial holding period, no more than 10% of the assets could be sold within any two-year period.

The draft legislation outlines several methods to finance these Bitcoin purchases. One approach involves allocating $6 billion from the Federal Reserve's net earnings remitted to the Treasury from fiscal years 2025 through 2029. Another method would reduce the discretionary surplus funds of Federal Reserve banks to $2.4 billion from the current level of $6.825 billion, as stipulated in the Federal Reserve Act.

Furthermore, the plan calls for revaluing the Federal Reserve banks' gold certificates to reflect their fair market value. Under this proposal, within six months of the legislation's enactment, the Federal Reserve banks would tender all their outstanding gold certificates to the Treasury Secretary. Within 90 days after that, the Treasury Secretary would issue new gold certificates reflecting the current market price of gold.

The Federal Reserve banks would then remit the cash difference between the old and new certificates to the Treasury Secretary.

As of July 24, the Federal Reserve banks held “gold stock” valued at $11 billion, based on the official U.S. book value of $42.22 per troy ounce. However, the market value of gold is significantly higher, with prices around $2,400 per troy ounce, according to MarketWatch. This substantial difference in valuation underscores the potential financial impact of the proposed revaluation.

Overall, Senator Lummis's plan represents a significant step towards integrating Bitcoin into the U.S. financial system, leveraging both existing and new resources to build a substantial national reserve of the cryptocurrency.