(Kitco News) – Amid speculation that Presidential candidate Donald Trump could propose making Bitcoin (BTC) a strategic reserve asset at the upcoming Bitcoin 2024 Conference, Senator Cynthia Lummis (R-WY) appears to have taken steps to make it a reality. Sources close to the lawmaker saying she plans to introduce legislation that would require the Federal Reserve to hold some Bitcoin for that specific purpose.
Fox Business was the first to report on the story, with three crypto executives with knowledge of the bill telling the outlet that Lummis has quietly been crafting the legislation and hopes to announce her intentions on Saturday at the conference, just before Trump's scheduled speech.
The report indicated that Lummis’ plans “remain in flux,” and it's possible that the announcement could be delayed as she works on the finer points of the bill. The sources indicated she is trying to have it finished before Trump speaks on Saturday, hoping that he will endorse the bill and the idea behind it.
There is also a chance that Lummis could announce the bill during a Friday afternoon fireside chat moderated by former Democratic Rep. Tulsi Gabbard. While the bill hasn’t been publicly revealed, Lummis hinted at it via a post on X, saying, “Big things are in store this week. Stay tuned!”
₿ig things are in store this week. Stay tuned!
— Senator Cynthia Lummis (@SenLummis) July 22, 2024
A source who has seen initial drafts of the bill told Fox Business that it “intends to direct the Fed to buy Bitcoin and hold it as a reserve asset in the same way that the nation’s central bank holds gold and foreign currencies to help manage the U.S. monetary system and keep the value of the U.S. dollar stable.”
The source added that Lummis has been working in the background to get some of her colleagues on the Senate Banking Committee to co-sponsor the bill.
Another source who has reviewed the draft says a major selling point is that it would help strengthen the U.S. dollar, which is currently backed by the faith and credit of the country's taxing authority, as opposed to any hard asset.
"Having the Fed hold Bitcoin as a strategic reserve asset would be a momentous move that brings stability to the U.S. dollar and our capital markets," said Alex Chizhik, Chief Commercial Officer at HarrisX. “It also sends a loud signal that our central bank is embracing innovation and as an independent body, is the natural non-partisan home for Bitcoin.”
While the idea sounds attractive in principle, achieving it will be no easy feat as implementing Bitcoin as a reserve asset would take the support of the president and Congress, with many legislators still harboring reservations about the digital asset class.
According to Sam Lyman, director of public policy at Riot Platforms, classifying Bitcoin as a strategic reserve asset could help the U.S. strengthen its position in the global financial system and combat the rising strength of China.
“As a form of ‘digital gold’ with the potential of higher returns for buyers, Bitcoin is uniquely positioned to complement physical gold as a strategic reserve asset,” Lyman wrote in an article on Forbes. “Much like the shiny metal, Bitcoin’s value derives from its scarcity and its emerging use cases as a store of value and a hedge against inflation. But Bitcoin also possesses many qualities that arguably make it superior to gold. Bitcoin, for example, is easier to transport, more verifiable, and a harder form of money than gold itself because it is more scarce and more difficult to mine.”
“The United States can use Bitcoin’s unique properties as a form of digital gold to deter China, Russia, and other competitors from leveraging their physical gold reserves to undermine US dollar dominance,” he said. “Classifying Bitcoin as a strategic reserve asset would be the starting pistol in the ‘Bitcoin Space Race.’”
“If the United States – the wealthiest country in the world and the home of global capital – begins accumulating Bitcoin on its balance sheet, then other countries would have powerful incentives to do the same,” Lyman added. “This would send nation-state game theory into hyperdrive as sovereigns scramble to accumulate the scarcest monetary asset on planet earth.
In effect, the United States could slow – and possibly even reverse – the flight to physical gold by initiating a digital gold rush.”
Matthew Pines, a national security fellow at the Bitcoin Policy Institute, wrote about the topic at length in a recent report, saying, “From a national security perspective, key decision-makers may realize the fact that allowing Bitcoin to monetize alongside (or outpacing gold) would disproportionately benefit the U.S. That is, while China and Russia double-down on analog gold, the U.S. can countermove to digital gold.”
The U.S. Department of Justice currently holds approximately 210,000 BTC, making it one of the largest holders of Bitcoin behind Satoshi Nakamoto. In theory, they could transfer their BTC holdings to the Treasury Department, giving the U.S. a strong head start on accumulating the asset for use as a reserve.
Due to the fixed supply of 21,000,000 Bitcoin, any entity buying large amounts could spark a rapid rise in price in a relatively short amount of time, leading to Lyman’s prediction of a “Bitcoin Space Race.” Because of this, crypto holders would likely be the biggest beneficiaries if Lummis’ bill were to become law.
"In price terms, strategic Bitcoin adoption really does imply a potentially stratospheric rise as the stakes in the market will be vastly more powerful in fiscal terms," Philipp Pieper, co-founder of Swarm Markets, told FOX Business.
At the time of writing, the Lummis camp has declined to comment on the story.
