Blockchain
US Bitcoin (BTC) Strategic Reserve to be Funded in Part by Fed’s Gold Revaluation, Bill Says
U.S. Senator Cynthia Lummis’s plan for a new strategic bitcoin reserve would fund purchases of the cryptocurrency in part by revaluing gold certificates held by the Federal Reserve System, according to a draft bill obtained by CoinDesk.
Lummis, a Wyoming Republican known for her pro-Bitcoin political stance, announced her intention to propose the reserve on Saturday at the Bitcoin Nashville conference. She took the stage minutes after former U.S. President Donald Trump, the Republican nominee for this year’s presidential race, gave a speech on blockchain policy to the cheering hall, packed to capacity of 8,500.
Trump, during this speech, approved the use of the U.S. government’s existing bitcoin reserves, obtained primarily through criminal seizures and forfeitures, to form the “core” of a new “national strategic bitcoin reserve.”
Under the draft bill, tentatively titled the “Bitcoin Act of 2024,” the Treasury Secretary would “establish a decentralized network of secure bitcoin storage facilities distributed across the United States,” selecting vault locations “based on a comprehensive risk assessment, prioritizing geographic diversity, security, and accessibility.”
The Treasury secretary would establish a “Bitcoin Purchase Program” of up to 200,000 BTC per year for five years, for a total of 1 million, according to the draft. The bitcoin would be held for at least 20 years and could only be sold for the purpose of paying off federal debt. After that, no more than 10% of the assets could be sold during a two-year period.
The bitcoin purchases would be funded through several methods, described in the draft legislation as “offsetting the cost of the Strategic Bitcoin Reserve.”
The plan would set aside $6 billion from any net earnings paid by the Federal Reserve to the Treasury from fiscal years 2025 through 2029 and would reduce the Federal Reserve banks’ discretionary surplus funds from $6.825 billion, the level currently set by the Federal Reserve Act, to $2.4 trillion.
There is also the revaluation of Federal Reserve Banks’ gold certificates to reflect their fair market value.
Under the plan, within six months of the law’s enactment, the Federal Reserve banks would offer all their outstanding gold certificates to the Treasury secretary. Within 90 days thereafter, the Treasury secretary would issue “new gold certificates to the Federal Reserve banks reflecting the fair market price of gold.”
The Federal Reserve banks would then “remit the difference in cash value between the old and new certificates” to the Secretary of the Treasury.
As of July 24, Federal Reserve banks held “gold stocks” valued at $11 billionaccording to the latest update of the central bank’s balance sheet.
But gold’s market value is more than 50 times higher, with front-month futures contracts on the yellow metal trading around $2,400, based on MarketWatch Prices.