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How Senator Lummis’s Plan for a $1 Million Bitcoin Acquisition Will Unfold: Proposed Legislation
On July 31, United States Senator Cynthia Lummis (R-Wyoming) shared a draft bill with CoinDesk, detailing a strategy to create a federal reserve of 1 million Bitcoin—a proposal significantly different from her earlier statements.
The suggested legislation, referred to as the “Bitcoin Act of 2024,” aims to initiate a “Bitcoin Purchase Program” for the U.S. Treasury.
The Bitcoin Act of 2024 suggests the creation of a US Strategic Bitcoin Reserve, partially funded by a reassessment of the #Fed’s #gold.
The #Bitcoin Purchase Program intends to acquire up to 200k #BTC annually over five years, ultimately reaching a total of 1M BTC. The Bitcoin will be… pic.twitter.com/foqdApuG73
— Matthew Dixon – CEO Evai (@mdtrade) July 31, 2024
This initiative would permit the purchase of as much as 200,000 BTC each year for five years, with the total federal Bitcoin reserve capped at 1 million BTC.
Key Aspects of the Lummis Bitcoin Act
The funding for these significant acquisitions relies on an ambitious idea: reassessing the gold reserves held by the U.S. government at Fort Knox. This reassessment aims to take advantage of the substantial price increase of gold over recent decades.
According to the legislation, the process would commence with Federal Reserve banks returning their current gold certificates to the U.S. Treasury.
Following this, the Treasury would issue “new gold certificates” to these banks, reflecting the gold’s current fair market value. The process concludes with the Fed banks transferring the cash value difference between the old and new certificates to the Treasury Secretary.
Financing the Initiative: Gold Revaluation and Reserve Surplus
As of July 25, the Federal Reserve’s balance sheet assessed its gold holdings at only $11 billion, seemingly based on the Federal Reserve Bank of New York’s outdated valuation of $42.22 per troy ounce.
However, with gold’s actual market price currently surpassing $2,423 per ounce—over 57 times the Fed’s valuation—the 8,134 tonnes of gold reportedly owned by the Treasury could be valued at an impressive $630 billion.
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George Selgin, director emeritus at the Center for Monetary & Financial Alternatives at the Cato Institute, regards the government’s current book value for its gold as an “accounting fiction.”
He asserts that Senator Lummis’s strategy to enhance the Lummis Bitcoin initiative through gold revaluation is “certainly feasible.”
The Treasury could then acquire $64 billion of BTC using just a portion of its surplus. Simple!
But…there is always a but.
— George Selgin (@GeorgeSelgin) July 29, 2024
In a tweet on Monday, Selgin indicated, “The Treasury could then acquire $64 billion of BTC using just a portion of its surplus.”
Furthermore, the bill suggests financing Bitcoin purchases through net earnings that the Federal Reserve transfers to the Treasury.
Specifically, from fiscal years 2025 to 2029, the legislation aims to reduce Federal Reserve banks’ discretionary surplus from $6.825 billion to $2.4 billion, directing the difference towards BTC acquisitions.
This approach aligns with Senator Lummis’s remarks at Bitcoin 2024. However, it would only address a small portion of the funds required to reach the 1 million BTC goal, currently valued at $66 billion.
While the gold revaluation proposal seems theoretically sound, some Bitcoin advocates express doubts regarding the actual existence of the gold reserves claimed by the government.
The Treasury has $350b in gold? Now THAT is a wild conspiracy theory. Audits or GTFO.
— Saifedean Ammous (@saifedean) July 30, 2024
Commenting on the Treasury’s alleged gold holdings, Saifedean Ammous, author of the Bitcoin Standard, voiced his skepticism on X: “The Treasury has $350b in gold? Now THAT is a wild conspiracy theory.” He referenced half of the Treasury’s claimed Fort Knox reserves and demanded “Audits or GTFO.”
The post How Senator Lummis’s 1 Million Bitcoin Purchase Plan Will Actually Play Out: Draft Bill appeared first on Cryptonews.
