Wyoming Senator Cynthia Lummis is proposing a bold move for the United States Treasury: converting part of its substantial gold reserves into Bitcoin to establish a national Bitcoin strategic reserve. Currently, the U.S. holds the largest gold reserves globally, with over 8,000 tons of the precious metal in its balance sheet.
A Bitcoin Strategic Reserve to Hedge Against Inflation
In a recent interview with Bloomberg, Senator Lummis suggested that the U.S. Treasury could convert its existing gold certificates into Bitcoin rather than spending approximately $90 billion to purchase Bitcoin at current market prices. She emphasized that such a conversion would keep the Treasury's balance sheet "neutral" while diversifying its holdings.
Previously, Lummis had advocated for the Treasury to acquire Bitcoin as part of its strategic assets but had not specified which assets should be liquidated to fund the purchase. The latest proposal, which includes converting a portion of the gold reserves, aims to bolster the nation’s financial resilience in the face of growing economic challenges.
When introducing the Strategic Bitcoin Reserve bill to the Senate, Lummis emphasized the urgency of this initiative: "As families across Wyoming struggle with rising inflation and the national debt reaches unprecedented levels, establishing a Bitcoin reserve is essential."
Overcoming Challenges to Establishing a Bitcoin Reserve
Senator Lummis’ proposal includes a plan to acquire 5% of the total Bitcoin supply, which equates to 1 million BTC, and hold it for a period of 20 years. However, at current market rates, this ambitious project would require a staggering $90 billion investment.
Despite the hefty price tag, some industry leaders believe it is a worthwhile endeavor. Notably, investor and asset manager Anthony Pompliano argued that there’s a global race among nations to secure Bitcoin. He pointed out that, given the scale of U.S. government spending, the cost is relatively minimal: “The national debt increased by $850 billion in just 90 days. If we were to allocate even a fraction of that to Bitcoin, it would be a small rounding error in the context of federal expenditures.”
Pompliano emphasized that investing $50-$100 billion in Bitcoin could be a strategic move, offering a favorable risk-reward ratio in the long term.
Market Reactions and Predictions
Not everyone is convinced that a Bitcoin reserve will materialize under the incoming administration. Galaxy Digital CEO Mike Novogratz expressed skepticism about the possibility of establishing a Bitcoin reserve under President-elect Donald Trump. However, he added that if the reserve plan does come to fruition, it could drive Bitcoin’s value to an unprecedented high of $500,000 per BTC.
With the potential transition to a Bitcoin-backed strategic reserve, the financial landscape could see significant shifts. Whether this initiative gains traction remains to be seen, but it has undoubtedly sparked discussions on the future of national reserves and digital currencies in the U.S.