U.S. Senator Cynthia Lummis, long known as the “crypto queen” of Capitol Hill, has thrown a financial twist into the post-election buzz by announcing her intention to establish a strategic Bitcoin (BTC) reserve.
source: Senator Cynthia Loomis
The bold move, declared just hours after Donald Trump was re-elected as US president, could redefine America’s fiscal strategy, but at the same time raises questions about its feasibility, impact on US debt, policy barriers and market volatility.
Historically, the United States has relied heavily on its gold reserves to stabilize and strengthen the dollar. As of September 2024, the United States holds approximately 8,133 tons of gold, surpassing Japan’s 845 tons and China’s approximately 2,113 tons. The Eurozone as a whole has about 10,784 tonnes.
Gold reserves by country (tons) Source: BuyGoldCoins
These massive physical gold reserves are valuable for their liquidity, security, and role in supporting national economic stability. In contrast, the hypothetical $200 billion worth of Bitcoin reserves currently represents less than 2.5% of the value of global gold reserves, raising questions about their strategic impact.
How to Implement Bitcoin Reserves
The newly elected Trump-Vance administration could issue an executive order directing the Treasury Department to allocate specific funds for Bitcoin acquisition.
In 2022, President Joe Biden authorized the release of 180 million barrels from the Strategic Petroleum Reserve to address soaring fuel prices. In this case, Bitcoin would be treated as a strategic asset rather than a currency, thereby avoiding certain regulatory hurdles.
Securing larger and more sustainable Bitcoin reserves would require congressional approval as it would require multi-year appropriations. Despite Trump’s cryptocurrency-friendly stance, the proposal could be delayed by opposition from traditionalists in Congress who may see Bitcoin as too speculative or risky compared to the country’s reserves.
Operationally, the U.S. Treasury could manage these reserves similarly to how it handles gold. Bitcoin is acquired through various funds within the Federal Reserve System.
Implementing this plan faces notable challenges, as oversight in the Senate and House of Representatives will likely scrutinize the risks of adding these volatile assets to the nation’s balance sheet, especially given bipartisan concerns about the long-term stability of cryptocurrencies. .
The proposal is unlikely to be implemented within the next two years
With inflation concerns still a major issue, any plans involving Bitcoin may face resistance from both the public and policymakers. But more importantly, even a $200 billion Bitcoin fund would represent only a fraction of the U.S. debt, which currently stands at $35.9 trillion.
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Even if an executive order could initiate limited government action, it is unlikely that such a proposal would gain sufficient legislative support in the near term. In essence, large-scale asset purchases require cooperation from Congress, making it impossible to secure full-scale reserves within the next two years.
As the next government grapples with this proposal, the outcome will depend on the balance between economic strategy and political feasibility. But for now, Bitcoin’s path to becoming a national reserve asset still appears to be full of obstacles.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.