Cynthia Lummis, the self-proclaimed “Bitcoin Senator,” as you may have heard, has announced a legislative proposal to create a government reserve of 1 million Bitcoin (BTC) within five years.
George Selgin, a financial expert at the Cato Institute, argues that the actual plan is less ambitious than it appears at first glance. He shared this view in a post on X.
What exactly are the plans?
Lummis suggests in her plans that the 1 million BTC would be financed with “excess reserves” from the Federal Reserve. However, Selgin has been in contact with Lummis employees and asked for details. He now believes that the U.S. Treasury Department, rather than the Federal Reserve, would buy the BTC.
Some of the needed money would be freed up by revaluing gold reserves. The revaluation process involves the Treasury issuing new gold certificates that match the current market value of gold. The Federal Reserve would then credit the Treasury with an additional $347 billion, which would allow it to purchase 1 million BTC at the current market price.
Is the plan realistic?
Selgin says that in theory this could be done. However, he has some concerns about this proposal. One major concern is that creating such a large reserve could threaten the stability of commercial banks. Ultimately, the money that leaves the Treasury ends up in commercial banks. These banks are then entitled to interest from the Federal Reserve. This would put a lot of pressure on the Fed to raise more money to pay these interests.
Furthermore, Selgin argues that the Treasury Department holding that much gold or BTC isn’t necessarily the best use of resources. He suggests that the U.S. government could sell gold to pay off debt.
Meanwhile, the US debt has grown to almost, brace yourself, $35 trillion. Selling gold to pay off debt is like mopping with the tap open. The total gold reserves of America amount to a few hundred billion dollars.
All in all, Selgin remains very skeptical about Lummis’ plans.
“Is there no other goal that will benefit the public as much as having a $64 billion Bitcoin supply? As for such questions, I’m afraid I remain very skeptical.”
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Source: https://newsbit.nl/hoe-realistisch-zijn-de-bitcoin-reserve-plannen-van-senator-lummis/
