U.S. Senator Cynthia Lummis, a supporter of Bitcoin and ally of Donald Trump, has put forward a bold idea: using the Federal Reserve’s gold to help the U.S. government buy Bitcoin. Her plan is to build a “Strategic Bitcoin Reserve” that could hold up to 1 million Bitcoin, roughly 5% of the total Bitcoin in existence.
The proposal per Bloomberg would cost around $90 billion at current Bitcoin prices and would use government assets, including gold, to fund it. By selling or revaluing the Federal Reserve’s gold holdings, the U.S. Treasury could acquire Bitcoin over several years, with hopes that the cryptocurrency would increase in value and reduce national debt. Lummis believes this could also prepare the United States for a digital economy.
Lummis argues that Bitcoin could serve as a valuable national asset, much like gold has done in the past. She sees it as a hedge against inflation and economic instability, especially as Bitcoin’s value has grown significantly over the years. Supporters of this plan say it could position the U.S. as a global leader in cryptocurrency adoption and innovation.
Challenges and concerns
Not everyone is on board with the idea. Critics point out that Bitcoin is highly volatile, which makes it a risky asset for national reserves. Convincing lawmakers to replace a traditionally stable asset like gold with Bitcoin may prove difficult. Additionally, the Federal Reserve would need to adjust how it values its gold holdings, as the current official value is far below market prices.
This proposal aligns with Trump’s pro-crypto policies, which include plans to make the U.S. a global hub for cryptocurrency. However, passing such a plan through Congress will likely face resistance, even with a more crypto-friendly administration.
If the proposal succeeds, it could lead to a significant rise in Bitcoin’s value and potentially inspire other nations to adopt similar strategies. However, the road ahead is uncertain.
The United States has had a complicated relationship with cryptocurrency, which has been further highlighted by the 2024 presidential election. Historically, the country has been a hub for crypto innovation, but its regulatory stance has caused friction.
Agencies like the SEC have imposed strict rules on crypto companies, arguing that many tokens qualify as securities and must follow legal guidelines. This has led to lawsuits and uncertainty, with critics claiming these actions hinder technological progress and push crypto businesses to more accommodating countries.
Meanwhile, the federal government has indirectly engaged with cryptocurrency by holding Bitcoin and other digital assets seized in criminal investigations. Traditionally, these assets have been auctioned, but recent proposals aim to use them strategically.
US elections and crypto
The 2024 presidential election became a critical moment for cryptocurrency in the U.S. Donald Trump, who initially expressed skepticism about crypto, embraced it during his campaign. His administration is now focused on making the U.S. a leader in cryptocurrency innovation.
Trump’s victory led to a surge in Bitcoin prices, with the market reacting positively to his promises to reduce regulatory hurdles, support crypto mining, and establish a Bitcoin reserve. His approach marks a departure from the previous administration, which had taken a more cautious and regulatory-heavy stance.
This shift has sparked debates. Supporters argue that Bitcoin can serve as a hedge against inflation and position the U.S. as a global crypto leader. Others, however, worry about the volatility of Bitcoin and the risks of relying on it as part of the national reserve.
While the 2024 election has brought cryptocurrency to the forefront of U.S. policy, its implementation will require careful consideration to balance innovation with economic stability. If successful, these initiatives could solidify the U.S.’s role in the evolving digital economy.
