United States Senator Cynthia Lummis has introduced the Bitcoin Strategic Reserve bill.
The bill requires the US government to establish a reserved fund using the flagship cryptocurrency to strengthen the strengthen the nation’s economic resilience and financial sovereignty.
Following her speech at the Bitcoin Nashville 2024 conference, where she initially proposed a BTC reserve, the bill, titled the Boosting Innovation, Technology and Competitiveness through Optimised Investment Nationwide (BITCOIN) Act, has now been presented to the Senate. An excerpt from of the draft legislation states:
Just as gold reserves have historically served as a cornerstone of national financial security, Bitcoin represents a digital-age asset capable of enhancing the financial leadership and security of the United States in the 21st-century global economy.
How will the Bitcoin be stored?
As part of the legislation, a “decentralised network” of secure Bitcoin storage facilities would be built across the United States.
These reserves would act as a cold storage system for government-owned Bitcoin and be overseen by the Secretary of the Treasury.
The Treasury secretary would also be responsible for “monitoring” and “auditing” the reserve.
Further, the Treasury would collaborate with the Secretary of Defense and the Secretary of Homeland Security, alongside industry experts, to secure the facilities.
The regulator will also ensure that all digital assets derived from Bitcoin forks and airdrops are recorded and stored in the reserve.
Additionally, these assets cannot be sold or disposed of for five years following their acquisition unless new legislation specifically permits such actions.
How much Bitcoin would be acquired?
A Bitcoin Purchase Program has also been mandated, under which the government will acquire a maximum of 1,000,000 Bitcoins.
The transactions would be executed over five years, with a maximum limit of 200,000 BTC purchased yearly.
These acquisitions would be conducted transparently to minimize market disruptions. The acquired BTC would be held for at least 20 years, with restrictions against their premature sale.
The bill also mandates a “Proof of Reserve” system requiring quarterly cryptographic attestations to verify the holdings within the Strategic Bitcoin Reserve. Reports on the status of the Bitcoin Purchase Program will be published annually.
How will the Bitcoin purchases be funded?
Several financial mechanisms have been suggested that would allow “offsetting the cost of the Strategic Bitcoin Reserve.”
The main approach involves reallocating surplus funds from the Federal Reserve banks. Specifically, the Act amends a section of the Federal Reserve Act to reduce the statutory cap on reserve bank surplus funds from $6.825 billion to $2.4 billion.
This adjustment frees up additional funds, directing the first $6 billion of net earnings remitted by the Federal Reserve banks to the Treasury each year, from 2025 through 2029, to finance the Bitcoin Purchase Program.
On top of this, the act mandates the revaluation of gold certificates held by the Federal Reserve.
The Federal Reserve banks are required to tender all of their outstanding gold certificates to the Treasury secretary within 180 days from the day the legislation is adopted.
After that, the Treasury secretary would issue new gold certificated within three months that “reflect the fair market value price of the gold.”
The difference in cash value between the old and new certificates would be remitted to the Treasury, providing another source of funds for the Bitcoin Reserve.
Lastly, the bill also addresses the issue of self-custody and includes provisions to affirm and safeguard the right of individuals, businesses, and organisations to maintain control over their Bitcoin holdings without interference from the government.
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