Senator Cynthia Lummis Proposes Converting U.S. Gold Reserves into Bitcoin for Strategic Reserve

November 2024 — Wyoming Senator Cynthia Lummis is advocating for the U.S. Treasury Department to convert a portion of the country's gold holdings into Bitcoin (BTC) as part of a strategic reserve. The U.S. government currently holds the largest gold reserves in the world, with over 8,000 tons of the precious metal on its balance sheet.

In an interview with Bloomberg, Lummis explained that by converting gold certificates held by the U.S. Treasury into Bitcoin, the immediate impact on the government's balance sheet would remain neutral. This approach would avoid the need for the U.S. to spend approximately $90 billion to purchase Bitcoin at its current market price.

Lummis has previously suggested that the U.S. Treasury should buy Bitcoin for a strategic reserve, but she has not specified which assets should be sold to fund the purchase. When she introduced the Strategic Bitcoin Reserve bill in the Senate, Lummis emphasized the importance of such a reserve, noting that it could help address financial challenges faced by American families, particularly in light of rising inflation and the country's growing national debt.

Bitcoin Strategic Reserve Proposal

Lummis’ proposal includes acquiring 5% of the total Bitcoin supply — roughly 1 million BTC — to be held for 20 years. At current market prices, this would cost the U.S. government approximately $90 billion. Investor and asset manager Anthony Pompliano has argued that despite the significant cost, Bitcoin remains a strong investment for sovereign nations.

Pompliano highlighted the global race for Bitcoin among governments, noting that recent increases in the U.S. national debt, including an $850 billion rise over the past 90 days, demonstrate how small Bitcoin’s multi-billion-dollar price tag would seem in comparison. "If we were to try to put that same $850 billion into Bitcoin, it would represent about half of Bitcoin's current market cap," he said, emphasizing that such an investment would be a “small rounding error” in the context of government spending, with strong potential for high rewards.

Challenges and Potential Impact

While some critics, including Galaxy Digital CEO Mike Novogratz, remain skeptical about the likelihood of a Bitcoin strategic reserve under a potential Trump administration, Novogratz suggested that if such a reserve were established under a future administration, Bitcoin's price could soar. He speculated that Bitcoin could surge to $500,000 per BTC if the U.S. Treasury were to build a strategic reserve of the cryptocurrency.

As the debate over Bitcoin’s role in national reserves continues, Lummis' proposal is sparking conversation about the future of both digital assets and traditional government financial strategies.