Senator Cynthia Lummis has a radical idea: let the Federal Reserve buy Bitcoin. She believes this could significantly improve the US’s financial health.
A Bitcoin Reserve for the US
Lummis’s proposal is to have the US government buy 200,000 Bitcoins per year for five years, totaling 1 million BTC. This “Strategic Bitcoin Reserve” (SBR) would then be held for at least two decades. She projects this would create a fund worth around $16 trillion. The idea is to use this Bitcoin reserve to support the US dollar and act as a long-term savings account to help offset the massive national debt.
The Fed’s Current Stance
Currently, Federal Reserve Chair Jerome Powell says the Fed isn’t allowed to own Bitcoin due to existing laws. He’s not pushing for a change in the law. Lummis acknowledges this legal hurdle but wants Congress to change the rules to allow the Fed to hold Bitcoin. She also wants to move the roughly 200,000 Bitcoins currently held in the asset forfeiture fund into this new reserve.
Why Bitcoin? Lummis’s Argument
Lummis argues that Bitcoin is “digital gold,” a finite resource (only 21 million will ever exist). While acknowledging its volatility, she emphasizes its long-term growth potential, which she believes far surpasses that of the US dollar. She points to Bitcoin’s historical growth, expecting it to continue growing, albeit at a slower rate than in its early years, while the US dollar continues to lose value due to inflation. This, she believes, makes Bitcoin a good hedge against inflation and a way to strengthen the US dollar’s global position.
The Bitcoin Act of 2024
This proposal aligns with the Bitcoin Act of 2024, which aims to establish the SBR and secure storage for the Bitcoin. The Act proposes funding the Bitcoin purchases through existing government reserves, not raising taxes.
The Bottom Line
Senator Lummis’s proposal is ambitious. It challenges the current legal framework and the Fed’s position on cryptocurrency. However, she believes that a Strategic Bitcoin Reserve could be a powerful tool for long-term financial stability and a safeguard against the growing national debt. At the time of this writing, Bitcoin was trading at approximately $95,324.
