US senator proposes buying one million Bitcoin for strategic reserve

Cynthia Lummis. Bild von ihrer Senat-Seite, geteilt über Wikimedia, Rechte: Gemeinfrei.

The Pro-Bitcoin Senator Cynthia Lummis wants to make the USA a Bitcoin superpower with the BITCOIN Act. To achieve this, she plans to establish a new, decentralized, and transparent Fort Knox.

At the Bitcoin2024 conference in Nashville last week, not only did Donald Trump speak, but so did Republican Senator Cynthia Lummis. Known for her long-standing Bitcoin-friendly stance, it’s no surprise that her Bitcoin plans far surpass those of Trump.

Specifically, the „BITCOIN Act“ she proposed exceeds all the hopes of Bitcoin enthusiasts. It’s a significant proposal—and, upon closer inspection, a realistic plan for the long-term financial dominance of the USA.

Bitcoins to Strengthen the Financial Leadership of the USA

The „Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide Act of 2024″—shortened to „BITCOIN ACT of 2024″—is intended to „establish a Strategic Bitcoin Reserve and ensure through additional programs that the government’s Bitcoin holdings are managed transparently.“

The Senate should recognize, according to the draft, „that the global financial landscape is rapidly evolving and digital assets are playing a growing role in the world economy.“ Bitcoin has proven its resilience and has established itself over the past decade as a medium of exchange and a store of value.

Just as „a gold reserve has historically served as a cornerstone of national financial security, Bitcoin represents a digital age asset capable of strengthening the financial leadership and security of the United States in the 21st-century global economy.“

Wow—how true that is. A Bitcoin reserve could—perhaps must—be the foundation of future global financial significance. Therefore, Lummis calls for „the acquisition and long-term storage of substantial quantities of Bitcoin by the United States.“

„A Decentralized Network of Secure Bitcoin Storage Facilities“

To achieve this, a new kind of Fort Knox is to be formed, „a decentralized network of secure Bitcoin storage facilities spread across the United States.“ These storage facilities are to be secured with all available measures with the help of the Department of Defense and Homeland Security.

A „Bitcoin Purchase Program“ is intended to fill this „Strategic Bitcoin Reserve.“ For five years, the USA is to purchase 200,000 Bitcoins annually, as transparently and market-friendly as possible, ultimately accumulating one million Bitcoins or nearly five percent of all circulating Bitcoins. Furthermore, all government agencies will be prohibited from selling or pledging Bitcoins under their control, such as those obtained through confiscations. Instead, once these Bitcoins legally belong to the United States, they will be added to the strategic reserve.

The Bitcoins in the Strategic Reserve are to be held for at least 20 years. During this period, they must not be „sold, exchanged, auctioned, pledged, or otherwise disposed of, except to retire outstanding debt instruments.“ This phrase („… retire outstanding debt instruments“) is somewhat obscure.

A system of quarterly „Proof of Reserves“ is to ensure transparency, verifying holdings using cryptographic methods. Bitcoin addresses will be published in reports on a website, and administrators will sign them with their keys.

This would make such a Bitcoin reserve the first democratically managed reserve fully transparent to the sovereign people. Never before has a state reserve belonged so much to the people as this one.

Pushing the Boundaries of the Conceivable

Economically, this reserve would have the effect of a self-fulfilling prophecy. If the USA makes Bitcoin a Strategic Reserve—then Bitcoin will become a Strategic Reserve. If Bitcoin holds such value for the USA that it accumulates a million Bitcoins—then Bitcoin holds this value.

As a pioneer, the USA would benefit enormously from Bitcoin becoming the new reserve asset. It would compel others to follow suit, much like gold. A financially solid nation must hold gold today—and in the future, according to Lummis, also Bitcoin.

However, how the USA will purchase a million Bitcoins remains somewhat vague. The draft mentions revenues from Federal Reserve Banks and surpluses from gold certificates. But initially, the USA will likely gather the necessary funds, especially since it can create dollars almost at will.

But the BITCOIN Act so far is more a wishful thought than a real prospect. While the Senator can bring the bill to Congress—it is, at least currently, very unlikely to be passed. However, who knows what might happen, and more than the specific law, it is likely about shifting the boundaries of what can be said and thought. Compared to Lummis‘ plans, Trump’s proposal to allocate the confiscated coins in state possession—currently about 200,000—to a Strategic Reserve seems almost conservative.