Now that Donald Trump is set to become the next president of the United States, a strategic Bitcoin reserve is in the cards. The idea was teased by Trump and several other U.S. politicians in July and early August, but lost steam following a Bitcoin price crash.
One of those prominent voices is that of Senator Cynthia Lummis, a Republican from Wyoming who has been called the “Bitcoin Senator” for her vocal support of the crypto industry. She shared strategic reserve plans at the Bitcoin conference in Nashville in July, and told Decrypt this week that it can happen with Trump earning a second term.
“President Trump has proven he will be the most pro-Bitcoin and pro-crypto president in our nation’s history,” she said, “and under his leadership, we are better positioned than ever before to build a brighter economic future by creating a strategic Bitcoin reserve.”
WE ARE GOING TO BUILD A STRATEGIC BITCOIN RESERVE 🇺🇸 🇺🇸 🇺🇸
— Senator Cynthia Lummis (@SenLummis) November 6, 2024
Lummis has “led the charge” to create the reserve, which she claims will “supercharge the U.S. dollar’s position as the world reserve currency for decades to come.”
The path to its creation is already underway with the introduction of the yet-to-be-passed Boosting Innovation, Technology, and Competitiveness Through Optimized Investment Nationwide Act—simply referred to as the “Bitcoin Act.”
“The bill establishes a decentralized network of secure Bitcoin vaults operated by the United States Department of Treasury,” Lummis explained. “[It] implements a one-million-unit Bitcoin purchase program over a set period of time to acquire a total stake of approximately 5% of total Bitcoin supply; and affirms self-custody rights of private Bitcoin holders.”
At Bitcoin’s current price of approximately $76,400, this would cost the country more than $76 billion. However, the buying period would last for five years, and Bitcoin’s price is famously volatile. On top of that, a government entity declaring plans to acquire nearly 5% of the total supply of Bitcoin—and then starting to do so—would likely impact the price.
Lummis claims that this would be paid by diversifying existing funds within the Federal Reserve, consisting of bonds, loans, and other assets like gold, which currently sits around $7 trillion—rather than creating additional debt.
“The Strategic Bitcoin Reserve would mirror the Treasury Department’s existing responsibility for managing the nation’s gold reserves, operating independently from the Federal Reserve System,” Lummis explained. “Our aim was to establish it as a modern parallel to our gold stockpile, serving as a digital-age hedge against economic uncertainty while maintaining the Treasury’s historical role in safeguarding critical national reserves.”
Interestingly, the U.S. government already holds billions of dollars’ worth of Bitcoin seized through criminal cases. “This puts substantial Bitcoin reserves under government custody,” a Coinbase representative told Decrypt.
According to Arkham Intelligence, the U.S. government currently holds nerly $16 billion worth of Bitcoin, along with other digital assets. It is unclear if these funds would be absorbed by the proposed strategic reserve. Earlier this year, the government started moving these funds, with Trump vowing that under his presidency, the government would not sell seized Bitcoin.
Lummis claims that the new strategic Bitcoin reserve would also run under a similar “never sell your Bitcoin” ethos as outlined by Trump.
“The Bitcoin Act creates a minimum holding period that requires any Bitcoin acquired under the legislation to be held in reserve for 20 years,” she told Decrypt, “At the end of the 20-year holding period, the U.S. would reevaluate its position and make a decision as to where to go from there.”
The bill was introduced to the Senate by Lummis in July, but failed to move beyond that stage. Still, the act needs to be reviewed and passed by the Senate and the House, and finally approved by the president.
“Next Congress is the perfect time to get this legislation and other common sense digital asset bills across the finish line,” Lummis added.
However, not every crypto enthusiast is happy about the plan. There are concerns about the centralization of Bitcoin within the U.S. government, which bucks the kind of independent ethos that has defined the leading cryptocurrency.
“Going this route could very well centralize the asset, giving government oversight to an asset that prides itself on being decentralized,” said Telcoin President of Banking Operations Patrick Gerhart, who previously spent a decade working on political campaigns and initiatives for U.S. senators. “It would then have more control over the product and its place in the marketplace.”
While the current plan would be to hold Bitcoin for 20 years, at the end of this period, any sizable sales could significantly impact the market—especially if the government held 5% of the total supply. For this reason combined with general crypto-related wariness, Gerhart explains, there may be some difficulty in passing this act.
“One would have to convince a lot of skeptical senators and representatives that this is a good idea,” he explained. “Considering how new this product is and the need for better understanding and oversight of it, I believe it would take some time to get this idea off the ground.”
Edited by Andrew Hayward
