An ally of President-elect Donald Trump in the U.S. Senate is proposing a bold plan that would fill Trump’s proposed strategic reserve of bitcoin without adding to the federal government’s deficit, and the method is pretty straightforward: Sell some of the Federal Reserve’s gold reserves…
Republican Senator Cynthia Lummis of Wyoming plans to push for a BITCOIN Act to achieve this goal when the new Congress takes office next year. The bill would require the U.S. to buy 1 million bitcoins, nearly 5% of the largest circulating token.
At current market prices, the purchase of 1 million coins would cost about $90 billion - of course, if the bill passes and investors buy them before the government does, the amount will likely increase.
Lummis said in an interview with the media, "We already have financial assets in the form of gold certificates (on the Fed's balance sheet) that can be converted into Bitcoin. The impact of this move on the US balance sheet is very neutral."
It is worth mentioning that the above-mentioned bill proposed by Lummis will greatly expand the scope of Trump’s Bitcoin strategic reserve plan revealed so far, that is, the more than 210,000 bitcoins currently owned by the US government, which have been confiscated through crackdowns on illegal operations or asset seizures.
Under Lummis’ bill, cryptocurrencies would have to be held for at least 20 years, and the assumed appreciation would help reduce Treasury issuance.
The Fed does, at least in theory, have enough gold to buy 1 million bitcoins and still have plenty left over.
The Treasury holds gold certificates listed on the Fed's balance sheet, with a nominal value of about $11 billion. However, this value is based on the so-called fiat price, which has remained constant at $42.2222 per ounce since 1973. At today's real spot price, the actual value of this gold is as high as $675 billion.
Of course, if the US authorities really sell a large amount of gold, it will definitely bring the risk of pushing down the price of gold.
Will the bill be passed?
So, what are the chances that the bill that Lummis is currently planning to propose will be approved by Congress?
Some market observers said that although the White House is expected to welcome many Bitcoin supporters after the change of government, and the currency circle also hopes that this will be the most cryptocurrency-friendly Congress in history, the above bill, which currently has no co-sponsor, may be destined to face a tough game battle.
Current pricing on cryptocurrency prediction platform Polymarket shows that the probability that Trump will actually build up a Bitcoin reserve after taking office is only 31%.
Jennifer J. Schulp, director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives, noted that “this (establishing Bitcoin reserves) still amounts to putting government funds at risk, and Bitcoin has not shown itself to be a particularly stable asset. The bill seeks to give senators and representatives greater confidence in its long-term viability, even though these members may not know much about cryptocurrencies.”
Michael Novogratz, the billionaire head of cryptocurrency investment firm Galaxy Digital, also said in an interview that he believes it is unlikely that the United States will establish a strategic reserve of Bitcoin. If the United States does establish such a reserve, Novogratz expects it to push the price of Bitcoin to $500,000 as other countries will be forced to establish similar reserves.
However, Lummis is still optimistic that her Bitcoin bill will gain support in the next Congress. She said that Trump has already endorsed the idea of building a Bitcoin reserve and that his closest advisers include those who "understand Bitcoin and its role in our future world."
