“Fostering innovation, technology and competitiveness through nationwide customized investments,” or bitcoin act 2024The bill, introduced by Senator Cynthia Lummis of Wyoming, seeks to firmly establish Bitcoin as a strategic asset in the United States’ financial arsenal. At its core, the Act proposes the creation of a Strategic Bitcoin Reserve (SBR) and a Structured Bitcoin Purchase Program, and a comprehensive national custody policy. While the bill is fairly brief, what follows is a description of the Act’s key provisions, their implications, and the innovative financing mechanisms planned.
Strategic Bitcoin Reserve
The establishment of the SBR represents a paradigm shift in the way Bitcoin is managed and cared for at the federal level. Mirroring many of the best practices currently being discussed in the field, such as geographically distributed keys, cold storage mandates, and independent proof-of-reserves audits, the SBR creates a decentralized network of secure Bitcoin storage facilities across the United States. (However, notably, multi-signature systems are not mentioned, although they are not explicitly prevented either.) The Act thus aims to protect against breaches and vulnerabilities caused by a single catastrophic event.
Bitcoin purchase program
The Act plans to acquire up to 1,000,000 bitcoins over a five-year period, with a purchase limit of 200,000 bitcoins annually, and then hold such reserves for twenty years. In addition, the Act imposes limitations on the use and sale of the reserve after the holding period. During the minimum holding period, any bitcoins held by the federal government in the SBR may not be sold, swapped, auctioned, mortgaged, or otherwise disposed of for any purpose other than to retire outstanding federal debt instruments.
Financing the Bitcoin Purchase Program
To minimize the impact on taxpayers, the Act uses multiple methods to finance the acquisition of bitcoin, ensuring economic stability without increasing the federal debt.
It first proposes amending the Federal Reserve Act to reallocate discretionary surplus funds from Federal Reserve Banks. This reduces discretionary surplus funds from $6.825 billion to $2.4 billion. It then requires the Federal Reserve to send the net proceeds to the Treasury, and the act redirects the first $6 billion toward buying bitcoin.
In addition, the Act also includes adjustments to the valuation of gold certificates held by the Federal Reserve. Currently, the Federal Reserve holds gold certificates that are worth $42.22/ounce, while the market price of gold today is close to $2,400. Essentially, this forces the Federal Reserve to sell the gold certificates into the market, then send the profit on the gold to the Treasury for the purpose of funding the initial acquisition.
State involvement
The act contemplates accepting state-level bitcoin holdings into the national framework through voluntary participation. This aspect allows individual states to store their bitcoin holdings in separate accounts within the SBR. By offering this option, the federal government allows (but does not force) states to add bitcoin to their own treasuries, without having to re-create and implement a robust security plan.
States participating in the program retain exclusive and separate ownership of their bitcoin, and have the right to withdraw or transfer their bitcoin holdings from the SBR, subject to the terms of their contractual agreement and any applicable federal regulation, but are not subject to federal restrictions applicable to the SBR. This flexibility ensures that states can manage their bitcoin treasuries in accordance with their specific financial strategies and needs.
Implications and next steps
By tapping existing financial resources and leveraging the economic value of gold, the Bitcoin Act aims to acquire Bitcoin without placing a direct burden on taxpayers or increasing the federal debt. This multi-pronged approach underscores the innovative financial strategies the Act employs to integrate Bitcoin into the National Reserve System, setting the stage for a comprehensive Bitcoin policy at all levels of the United States government.
Readers who wish to support the act should contact their legislators directly or through tools like this one, which has been created by the act. Satoshi Action Fund,
This is a guest post written by Colin Crossman. The opinions expressed are entirely his own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
