U.S. Senator Cynthia Lummis is leading the charge on a groundbreaking proposal to establish a Strategic Bitcoin Reserve by reallocating funds from the Federal Reserve's gold reserves. The draft legislation, known as the "Bitcoin Act of 2024," outlines a plan to establish a "Bitcoin Purchase Program" allowing the purchase of up to 200,000 BTC annually for five years. Senator Lummis announced her ambitious plan at the Bitcoin Nashville conference, following an endorsement by former President Donald Trump for a national bitcoin stockpile utilizing existing government-held bitcoins.

The proposed Bitcoin Purchase Program, under Lummis's legislation, aims to accumulate a total of 1 million BTC over a five-year period. The cryptocurrency assets would be securely stored in a decentralized network across the U.S., as designated by the Treasury secretary based on risk assessment and security measures. The bill also includes provisions mandating that the bitcoin holdings be retained for at least 20 years and can only be utilized for federal debt payments.

To finance the acquisition of bitcoins for the Strategic Bitcoin Reserve, the draft bill suggests several methods, including setting aside $6 billion from Federal Reserve's net earnings remitted to the Treasury from 2025 to 2029. Additionally, it proposes revaluing Federal Reserve banks' gold certificates to reflect their market value, potentially leading to significant gains. The Federal Reserve banks currently hold a gold stock valued at $11 billion, a fraction of its actual market value when compared to recent pricing data on gold futures.

The revaluation of the gold certificates, according to the legislation, would involve Federal Reserve banks transferring their existing gold certificates to the Treasury secretary for reissuance at fair market value. This process would result in the Federal Reserve banks remitting the difference in value to the Treasury secretary, potentially unlocking substantial funds for the Strategic Bitcoin Reserve. Senator Lummis's innovative approach highlights the growing intersection between traditional assets like gold and the burgeoning cryptocurrency market, signaling a new era of financial diversification within the U.S. government.