US Senator Cynthia Lummis of Wyoming is intensifying her advocacy for Bitcoin, aiming to incorporate this digital asset into the national reserves. In a bold move, she proposes a shift in financial strategy that could redefine the country’s economic landscape.
Senator Lummis Proposes Bitcoin as a Strategic Asset
During an interview on November 21, Lummis suggested that the US Federal Reserve consider divesting part of its gold reserves to invest in Bitcoin. She argues that proceeds from selling gold, evaluated at 1970 prices, could enhance the US dollar’s strength and mitigate the nation’s escalating debt.
This proposal aligns with Bitcoin’s recent surge to a new all-time high, approaching the $100,000 mark. By adopting a Bitcoin reserve policy, Lummis believes the Federal Reserve could benefit from potentially higher returns, labeling Bitcoin as the “gold standard” in digital assets.
Potential Impact on US Dollar and National Debt
Lummis is a prominent advocate for Bitcoin and digital currencies, actively promoting the Bitcoin bill in the Senate. As a seasoned crypto investor, she disclosed owning five Bitcoins, securely held in a trust. The senator recommends the government could initiate a crypto reserve, maintaining these assets for at least two decades.
In her discussions with the incoming US President Donald Trump, Lummis outlined a plan to convert the Federal Reserve’s gold certificates to their current market value. The proceeds, originally pegged at 1970s prices, could then be used to acquire Bitcoin.
Understanding the Proposed Bitcoin Reserve
The proposed Bitcoin reserve involves a structured investment approach over several years. Under the Bitcoin Act 2024, the Treasury would purchase 200,000 Bitcoins annually for five years, with plans to retain these assets for a minimum of 20 years.
The government intends to implement a Proof of Reserve System, ensuring transparency and accountability through publicly available audited quarterly reports. Any Bitcoin holdings by other agencies would be consolidated under this strategic reserve. Additionally, the reserve would serve as a secure financial mechanism, allowing government agencies to utilize Bitcoin as long-term assets. To safeguard these assets, a decentralized storage network would be established, protecting against potential vulnerabilities and risks.
Criticism of the Lummis Proposal
Despite its potential benefits, the Lummis plan faces criticism. Avik Roy from the Foundation for Research on Equal Opportunity (FREOPP) argues that creating a Bitcoin reserve might not address the nation’s debt challenges. Speaking at the North American Blockchain Summit 2024, Roy highlighted that while a Bitcoin reserve could be beneficial, comprehensive budget reforms are necessary to tackle the $35 trillion national debt and the $2 trillion annual deficit. He warned that the US might eventually abandon its Bitcoin reserves, similar to the fate of gold in the 1970s.
As discussions continue, the Lummis proposal sparks a broader debate on the role of digital assets in national financial strategies, highlighting the evolving landscape of global finance.
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