On July 27, 2024, at a Bitcoin conference in Nashville, a striking new topic emerged on the U.S. political stage. U.S. Senator Cynthia Lummis, known for her support for cryptocurrencies, proposed a bold proposal to include Bitcoin in the U.S. government's reserve assets to stabilize the value of the dollar and curb inflation. This move once again pushes Bitcoin toward the possibility of being a national strategic reserve asset.
This article will delve into the details of the Bitcoin Strategic Reserve Act, assess its potential impact on the U.S. economy, and how Bitcoin could play a broader role in the U.S. economy.
Bitcoin may become a new strategic reserve for the US economy
Following her initial statement, Senator Lummis formally introduced the Bitcoin Strategic Reserve Act on July 31. The purpose of this bill is to establish a dedicated reserve fund for Bitcoin, ensuring its security in different geographical locations. The plan proposes that the government purchase Bitcoin within five years and hold these assets for at least 20 years, with the ultimate goal of reducing the national debt. Meanwhile, as of August 1, the US national debt has exceeded $35 trillion. Senator Lummis said that this strategic reserve has the potential to help the United States reduce the national debt in half by 2045.
At the same conference, two political heavyweights, former President Donald Trump and independent presidential candidate Robert Kennedy Jr., also expressed support for the U.S. Bitcoin reserve. Trump promised that if the government holds Bitcoin, he will not sell these assets. Kennedy proposed a more radical plan, suggesting buying 500 Bitcoins a day until a reserve of 4 million Bitcoins is accumulated.
While Senator Lummis acknowledged that her bill has little chance of passing before the 2024 election, the growing interest in Bitcoin in political circles signals a shift in government attitudes toward the emerging asset class.
As Bitcoin gradually becomes an indispensable part of the global financial system, whether the US government should include it in its strategic reserves to cope with future economic challenges has become a question worthy of deep thought.
Decoding the Bitcoin Act of 2024
The recently introduced "Promoting Innovation, Technology, and Competitiveness by Optimizing National Investment Act of 2024" (also known as the "Bitcoin Act of 2024") by Senator Lummis proposes a comprehensive battle plan to integrate Bitcoin into the U.S. financial system to promote innovation, technology, and competitiveness.
The core of the bill is the Bitcoin purchase plan, which is expected to purchase up to 200,000 Bitcoins per year over five years, totaling 1,000,000 Bitcoins. These Bitcoins will be included in the strategic reserve and stored for at least 20 years to ensure stability and security during market fluctuations.
The bill emphasizes the importance of security measures and requires the Secretary of the Treasury, in consultation with the Secretary of Defense and the Secretary of Homeland Security, to take advanced physical and digital security measures to protect strategic reserves. In addition, to ensure transparency and accountability, the bill requires the establishment of a quarterly reserve certification system, including public cryptographic proof and independent third-party audits, to verify the holdings of Bitcoin reserves.
At the same time, in terms of the management of Bitcoin forks and airdrops, the bill stipulates that new assets obtained through these mechanisms must be kept in strategic reserves for at least five years to ensure correct accounting and storage. This not only helps maintain the integrity of the assets, but also provides additional stability to the market.
The bill also encourages states to participate in the program by allowing them to store their Bitcoin holdings in separate accounts within the strategic reserve. In this way, states can enjoy federal security and management protocols while retaining full control and legal ownership of their assets.
To manage the costs of building and maintaining a strategic reserve, the bill proposes using funds within the Federal Reserve System, including surplus earnings that normally go to the Treasury. In addition, the Fed is required to consider revaluing its holdings of gold certificates to help finance its reserves.
The Bitcoin Act of 2024 is not only a redefinition of Bitcoin’s role in the U.S. economy, it is also a bold investment in the innovation and competitiveness of the U.S. financial system. As this bill moves forward, we may witness Bitcoin playing an even more central role in the U.S. economy, bringing unprecedented financial stability and growth potential to the country.
What experts think of the proposal
In exploring the potential impact of the Bitcoin Strategic Reserve Act proposed by Senator Cynthia Lummis, we had the pleasure of interviewing American attorney and political consultant Moe Vela. Mr. Vela has extensive experience in the White House, having served in key positions in both the Clinton and Obama administrations.
Mr. Vela was critical of Lummis’ proposal and described it as “a disaster in the making.” He argued that it was irresponsible to invest taxpayers’ money in Bitcoin, a cryptocurrency that he believed lacked substance to back it. Mr. Vela highlighted the risks of Bitcoin, including its declining market share, lack of organizational infrastructure, and the problems that could arise from its anonymity.
When it comes to Republican support for cryptocurrencies, Mr. Vela expressed skepticism, arguing that the Republican Party’s support for cryptocurrencies seems to be more about political pandering than a sincere stance, noting that the Republican Party’s stance might be more sincere if it were not pandering to an important group of voters.
Mr. Vela is also skeptical about the potential economic impact of Bitcoin as a reserve asset. He has been vocal in expressing his view that Bitcoin’s disadvantages far outweigh its potential advantages.
However, Mr. Vela also offered some positive suggestions. He advocated for focusing on cryptocurrencies that are backed by tangible assets and regulated by regulators such as the U.S. Securities and Exchange Commission (SEC), and encouraged governments to pay attention to these cryptocurrencies.
Discussion of future development prospects
The growing U.S. national debt could lead to serious economic consequences if effective measures are not taken. The Congressional Budget Office predicts that if no key policy changes are made, the debt is expected to reach 166% of GDP by 2054.
Although Bitcoin has achieved a compound annual growth rate (CAGR) of 42.3% over the past five years, providing an opportunity to alleviate debt, its market volatility and the imperfections of its early infrastructure are also key risk factors that cannot be ignored.
Although people like Moe Vela are critical of Lummis’ proposal, there are other different voices. For example, Sam Lyman, director of public policy at Riot Platforms, believes that Lummis’ efforts are crucial to the Bitcoin community and may pave the way for innovative financial strategies.
However, the success of this proposal will depend on a variety of factors, including the implementation of strong security measures, regulatory clarity, and the ability to manage Bitcoin’s volatility.
As the debate continues, Senator Lummis’ proposal will undoubtedly spark important discussions about the role of digital assets in the nation’s finances.
At the same time, whether this innovative approach can become an effective way to resolve the national debt crisis or a risky gamble, I believe time will eventually give the answer.
Summarize:
As we analyze the Bitcoin Act of 2024, we are witnessing a heated debate about the future direction of the country's finance. From Senator Lummis's bold proposal to Mr. Vela's sharp criticism to the positive outlook of industry figures such as Sam Lyman, this topic highlights the complexity of financial policy making.
Although the ultimate fate of the bill is still unclear, it has already stimulated in-depth thinking about the role of digital assets in the country's economic strategy. Ultimately, whether the United States includes Bitcoin in its strategic reserves is not only an economic decision, but also an important vote on the vision of the future. As time goes by, we will witness how this debate shapes our economic prospects.
