U.S. Senator Cynthia Lummis’s plan for a new Strategic Bitcoin Reserve would partly fund Bitcoin purchases by adjusting the value of gold certificates held by the Federal Reserve, according to a draft of the bill obtained by CoinDesk. Lummis, a Republican from Wyoming known for supporting Bitcoin, announced her plan on Saturday at the Bitcoin Nashville conference. She took the stage just minutes after former U.S. President Donald Trump, this year’s Republican presidential nominee, spoke about blockchain policy to a packed room of 8,500 people.
During his speech, Trump supported using the U.S. government’s existing Bitcoin holdings, mainly obtained through criminal case forfeitures and seizures, to create the foundation of a new “strategic national Bitcoin stockpile.” The draft bill, called the “Bitcoin Act of 2024,” states that the Treasury Secretary would set up a decentralized network of secure Bitcoin storage facilities across the U.S. The locations for these vaults would be chosen based on a thorough risk assessment, prioritizing geographic diversity, security, and accessibility.
Bitcoin Purchase Program and Funding Methods Outlined in Draft Bill
According to the draft bill, the Treasury Secretary would start a “Bitcoin Purchase Program” to buy up to 200,000 BTC a year over five years, totaling 1 million BTC. This Bitcoin would be held for at least 20 years and could only be sold to pay off federal debt. After 20 years, no more than 10% of the assets could be sold in any two-year period.
The Bitcoin purchases would be funded through several methods described in the draft bill as “offsetting the cost of the Strategic Bitcoin Reserve.” The plan includes setting aside $6 billion from the Federal Reserve’s net earnings remitted to the Treasury from fiscal years 2025 through 2029. It would also reduce the discretionary surplus funds of Federal Reserve banks to $2.4 billion from the current $6.825 billion, as stipulated in the Federal Reserve Act.
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Treasury Secretary’s Role and Timeline
The plan also includes revaluing the Federal Reserve banks’ gold certificates to reflect their fair market value. Under the proposal, within six months of the legislation being enacted, Federal Reserve banks would submit all their outstanding gold certificates to the Treasury Secretary. Within 90 days after that, the Treasury Secretary would issue new gold certificates to the Federal Reserve banks that reflect the fair market value of the gold. The Federal Reserve banks would then remit the cash difference between the old and new certificates to the Treasury Secretary.
As of July 24, Federal Reserve banks held “gold stock” valued at $11 billion, according to the central bank’s latest balance sheet update. This valuation is likely based on the official U.S. book value of $42.22 per troy ounce, which the Federal Reserve Bank of New York uses to value its gold. However, the market value of gold is over 50 times higher, with front-month futures contracts trading around $2,400, according to MarketWatch pricing.
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