Sen. Lummis’ Bitcoin Bill Proposes Funding Strategic Bitcoin Reserve

Senator Cynthia Lummis's draft Bitcoin Bill proposes evaluating the US Federal Reserve's gold certificates to fund the proposed strategic reserve.

The bill proposes that the US government set up a Bitcoin Purchase Program" to acquire 200,000 BTC annually over five years.Proceeds from revaluing the Fed's gold certificates will be part of the funding sources of this Bitcoin purchase.

The Proposed Strategic Bitcoin Reserve

Republican Senator Cynthia Lummis from Wyoming announced plans to introduce a Bitcoin bill on Saturday during the BTC 2024 conference in Nashville.

We will convert excess reserves at our 12 Federal Reserve banks into #bitcoin over five years. We have the money now! pic.twitter.com/fGtYQ15jQJ

- Senator Cynthia Lummis (@SenLummis) July 27, 2024

The bill proposes the adoption of a strategic Bitcoin Reserve that will allow the Federal Reserve Bank to acquire and hold Bitcoin.

Senator Lummis's announcement came after Republican presidential candidate Donald Trump's speech at the conference. During his speech, Trump revealed plans to create a strategic reserve to encourage the US to retain its existing Bitcoin holdings and buy more.

This statement aligns with Lummis's plans. According to the draft legislation titled Bitcoin Act of 2024, the US Treasury Secretary will set up a decentralized network of facilities to securely store Bitcoin nationwide.

In addition, the Treasury Secretary will select the Bitcoin vault locations after conducting a comprehensive risk assessment. The locations will be based on geographic density, accessibility, and security.

Further, the Treasury secretary will set up a Bitcoin Purchase Program to acquire 1 million BTC over five years, purchasing up to 200,000 BTC annually.

The draft bill also stated that the US would hold the Bitcoin purchased for at least 20 years. The Bitcoin reserves can only be sold to pay off national debt. After the initial 20 years, the government can sell not more than 10% of the holdings within any two-year interval.

Funding Sources for the Strategic Bitcoin Reserve

The draft legislation outlined a few methods for the government to fund Bitcoin purchases. The bill described these funding methods as offsetting the cost of the Strategic Bitcoin Reserve."

The plan is to set aside $6 million from every earning the Federal Reserve remits to the Treasury between the 2025 and 2029 fiscal years.

In addition, it plans to reduce the Fed's discretionary surplus funds from $6.825 billion to $2.4 billion. The amended Federal Reserve Act limits aggregate surplus funds for the Federal Reserve banks to $6.825 billion.

Another funding method proposed in the draft bill is revaluing the Federal Reserve's gold certificates to reflect their actual value.

Lummis' plan proposes that the Feds remit all outstanding gold certificates to the Treasury within six months of the Bitcoin bill's enactment. Within the next three months, the Treasury Secretary would issue fresh gold certificates to the Feds.

These new gold certificates will reflect the actual market value of gold. Following the issuance, the Federal Reserve banks would remit the difference in cash value between the new and old gold certificates to the Treasury.This difference will be used to purchase Bitcoin for the strategic reserve.

Meanwhile, the Federal Reserve balance sheet released on July 11 shows the Federal Reserve banks hold gold stocks worth $11 billion.

This valuation could be based on the US' official book value of $422.22 per troy ounce of gold. The Federal Reserve Bank of New York values its gold based on this standard.

However, the actual market value of gold is over 50 times higher. Front-month gold futures trade around $2,417, according to MarketWatch data.

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