U.S. Strategic Bitcoin Reserve to Be Funded Partly by Revaluing Fed’s Gold, Draft Bill Shows

The purchase of Bitcoin for the new strategic reserve would be partially funded by the Federal Reserve’s repurchase of gold, according to a bill from the office of U.S. Senator Cynthia Lummis.

The plan proposes to establish a “Bitcoin Purchase Program” of up to 200,000 BTC per year for a five-year period.

U.S. Senator Cynthia Lummis’ new Strategic Bitcoin Reserve plan would fund cryptocurrency purchases in part through the repurchase of gold certificates held by the Federal Reserve System, according to a draft bill obtained by CoinDesk.

Lummis, a Wyoming Republican known for his pro-Bitcoin policy stance, announced his intention to propose the reserve at the Bitcoin Nashville conference on Saturday. He took the stage just after former U.S. President Donald Trump, the Republican nominee in this year’s presidential race, gave a speech on blockchain policy to a cheering room that had reached a capacity of 8,500.

In his speech, Trump approved using the US government’s existing Bitcoin holdings — mostly obtained through criminal seizures and forfeitures — to form the “core” of a new “strategic national Bitcoin stockpile.”

Under the short working title “Bitcoin Act of 2024,” the Treasury secretary would “establish a decentralized network of secure Bitcoin storage facilities distributed across the United States” and select the locations of the vaults “based on a comprehensive risk assessment, prioritizing geographic diversity, security, and accessibility,” according to the draft bill.

According to the bill, the Treasury secretary would create a “Bitcoin Purchase Program” of up to 200,000 BTC per year for a five-year period, totaling 1 million BTC. Bitcoin would be held for at least 20 years and could only be sold to pay off federal debt. After that, no more than 10% of the assets could be sold in any two-year period.

Bitcoin purchases will be funded through several methods, described in the draft bill as “covering the cost of the Strategic Bitcoin Reserve.”

The plan calls for setting aside $6 billion from net earnings that the Federal Reserve will transfer to the Treasury from fiscal years 2025 to 2029, and would reduce the discretionary excess funds of Federal Reserve banks to $2.4 billion from the current level of $6.825 billion under the Federal Reserve Act.

Fed reassesses gold

There is also the possibility of revaluing Federal Reserve bank gold certificates to reflect their fair market value.

The story continues

Under the plan, within six months of enactment, the Federal Reserve banks would auction all outstanding gold certificates to the Treasury secretary. Within 90 days thereafter, the Treasury secretary would issue “new gold certificates reflecting the fair market value of gold to the Federal Reserve banks.”

The Federal Reserve banks will then send the “difference in cash value between the old and new certificates” to the Treasury Department.

As of July 24, Federal Reserve banks held $11 billion worth of “gold stock,” according to the central bank’s latest balance sheet update.

This valuation may be 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 gold.

But gold’s market value is more than 50 times higher, with futures contracts for the yellow metal trading around $2,400, according to MarketWatch pricing.

Read more: WSJ Says Making Bitcoin a Strategic Reserve Asset Contradicts the ‘Independence from Government’ Narrative