Senator Cynthia Lummis Introduces the BITCOIN Act of 2024
During the Bitcoin 2024 Conference, Senator Cynthia Lummis (R-WY) announced a bold legislative proposal to create a national Bitcoin (BTC) reserve, describing it as "our Louisiana Purchase moment." On Wednesday, she followed through with the official introduction of the Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act of 2024. The proposed legislation aims to establish the United States as a leader in the global financial system by leveraging Bitcoin's unique properties as a digital asset.
Vision for a Strategic Bitcoin Reserve
The BITCOIN Act proposes the establishment of a decentralized network of secure Bitcoin storage facilities across the United States, collectively known as the Strategic Bitcoin Reserve. The initiative is designed to diversify the national assets by including Bitcoin alongside traditional reserves such as gold, thereby enhancing the financial resilience and leadership of the U.S. in the 21st-century global economy.
The bill outlines that Bitcoin, as a decentralized and finitely scarce digital asset, offers unique properties that can complement existing national reserves. It highlights Bitcoin's potential to strengthen the position of the U.S. dollar in the global financial system, offering a hedge against economic uncertainty and inflation. The Strategic Bitcoin Reserve would be responsible for the generation, safekeeping, and management of Bitcoin private keys associated with government holdings.
Acquisition and Long-term Holding Strategy
Under the proposed legislation, the U.S. government would initiate a Bitcoin Purchase Program, acquiring up to 200,000 Bitcoins annually for five years, totaling 1,000,000 BTC. The purchases are to be conducted in a transparent and strategic manner to minimize market disruption, with all acquired Bitcoin held in the Strategic Bitcoin Reserve for a minimum of 20 years. This long-term holding strategy is intended to ensure the stability and security of the reserve.
During the holding period, the BITCOIN Act mandates that no Bitcoin in the reserve may be sold, swapped, auctioned, encumbered, or otherwise disposed of, except for the purpose of retiring outstanding federal debt instruments. A year before the end of the holding period, the Treasury Secretary must submit recommendations to Congress on whether to continue holding the Bitcoins or allow for a controlled release of a portion of the holdings.
Transparency and Accountability Measures
To maintain transparency and public trust, the bill includes provisions for a quarterly Proof of Reserve system of public cryptographic attestation. This system requires the Treasury to publish quarterly reports on the state of the Bitcoin reserve on the Department of Treasury's website. The reports would be reviewed by an independent third-party auditor with expertise in cryptographic attestations to verify the accuracy and integrity of the data.
Additionally, the bill stipulates that any Bitcoin held by federal agencies, such as the U.S. Marshal Service, must be transferred to the Strategic Bitcoin Reserve upon acquisition of legal title. This measure aims to centralize government-held Bitcoin under a unified management system, ensuring consistent handling and security.
Funding and Fiscal Considerations
The BITCOIN Act outlines the use of discretionary surplus funds from Federal Reserve Banks to offset the costs associated with establishing the Bitcoin reserve. Specifically, the first $6 billion of net earnings remitted to the Treasury each fiscal year from 2025 to 2029 would be allocated to the Bitcoin Purchase Program. This funding mechanism ensures that the acquisition of Bitcoin does not unduly burden the federal budget or taxpayer funds.
In a complementary move, the bill also proposes revaluing the gold currently held by the Federal Reserve. This involves tendering all outstanding gold certificates to the Treasury and issuing new certificates that reflect the fair market value of the gold. The difference in cash value between the old and new certificates would be remitted to the Treasury, further supporting the financial feasibility of the Bitcoin reserve initiative.
Protecting Bitcoin Ownership Rights
Learning from past historical events, such as the 1933 Executive Order that led to the confiscation of privately owned gold, the BITCOIN Act includes explicit protections for Bitcoin ownership rights. The legislation ensures that the federal government cannot seize or impair the lawfully acquired Bitcoin holdings of individuals or entities. This provision safeguards the principles of financial sovereignty, privacy, and personal liberty in the digital age, emphasizing the importance of self-custody of private keys.
Strategic and Economic Implications
Senator Lummis underscored the transformative potential of Bitcoin for the United States, positioning it as a strategic asset that could significantly enhance the country's financial resilience. The acquisition of substantial quantities of Bitcoin is seen as a hedge against economic uncertainty and a way to strengthen the U.S.'s financial condition. By becoming the first developed nation to use Bitcoin as a savings technology, the U.S. could secure its position as a global leader in financial innovation.
The BITCOIN Act represents a landmark proposal in the integration of digital assets into national financial strategies. If enacted, it could set a precedent for other countries to consider similar measures, potentially reshaping the global financial landscape. The initiative also reflects a broader shift towards recognizing the value of cryptocurrencies as strategic reserve assets in an era of increasing fiscal challenges and economic uncertainty.
