In a groundbreaking legislative proposal, U.S. Senator Cynthia Lummis is championing the creation of a Strategic Bitcoin Reserve, with financing partially sourced from the revaluation of gold certificates held by the Federal Reserve System. This ambitious initiative, revealed in a draft legislation, signifies a pioneering step towards integrating cryptocurrency into national economic strategy.

Lummis, a Republican from Wyoming renowned for her pro-Bitcoin policy stance, unveiled her plans at the Bitcoin Nashville conference. Her announcement followed an address by former U.S. President Donald Trump, who, as the Republican presidential nominee, discussed blockchain policy to a rapt audience of 8,500 attendees.

In his speech, Trump endorsed the idea of utilizing the U.S. government’s existing Bitcoin holdings—acquired through forfeitures and seizures related to criminal cases—as the foundation for a “strategic national bitcoin stockpile.”

Read more: Bitcoin Exchange Reserve Dips to Three-Year Trough

The Bitcoin Act of 2024: Key Provisions

The draft bill, tentatively titled the “Bitcoin Act of 2024,” outlines several critical measures:

1. Decentralized Bitcoin Storage Network: The Treasury Secretary would be mandated to establish a secure, decentralized network of Bitcoin storage facilities across the United States. These locations would be selected based on a comprehensive risk assessment, emphasizing geographic diversity, security, and accessibility.
2. Bitcoin Purchase Program: The Treasury would initiate a Bitcoin Purchase Program, aiming to acquire up to 200,000 BTC annually over five years, totaling 1 million BTC. These assets would be held for at least 20 years, with disposal limited to paying off federal debt. Post this period, no more than 10% of the assets could be sold within any two-year timeframe.

Financial Strategies to Offset Costs

The bill proposes several methods to finance the Strategic Bitcoin Reserve:

• Earnings Allocation: Setting aside $6 billion from the net earnings remitted by the Federal Reserve to the Treasury from fiscal years 2025 through 2029.
• Reduction of Surplus Funds: Decreasing the discretionary surplus funds of Federal Reserve banks from $6.825 billion to $2.4 billion.

Revaluation of Gold Certificates

A pivotal aspect of the plan involves the revaluation of Federal Reserve banks’ gold certificates to their fair market value:

• Tendering and Reissuing Gold Certificates: Within six months of the bill’s enactment, Federal Reserve banks would tender all outstanding gold certificates to the Treasury Secretary. Within 90 days, new gold certificates reflecting the current market value of gold would be issued.
• Remitting Cash Value Difference: The Federal Reserve banks would remit the cash value difference between the old and new certificates to the Treasury Secretary.

Current Gold Valuation Context

As of July 24, Federal Reserve banks held gold stock valued at $11 billion, based on the official U.S. book value of $42.22 per troy ounce. However, the market value of gold is significantly higher, with front-month futures contracts trading around $2,400 per ounce, according to MarketWatch pricing.