Senator Lummis’ Bitcoin reserve proposal faces uphill battle

United States Senator Cynthia Lummis, long known as the “Crypto Queen” of Capitol Hill, has thrown a financial curveball into the post-election buzz by announcing plans to establish a strategic Bitcoin (BTC) reserve. 

This bold move, declared just hours after Donald Trump’s re-election, could redefine the US fiscal strategy, but at the same time raises questions on its feasibility, impact on US debt, policy barriers and market volatility.

Historically, the US has relied heavily on gold reserves to stabilize and strengthen the dollar. As of September 2024, the US holds approximately 8,133 metric tons of gold, dwarfing Japan’s 845 tons and China’s estimated 2,113 tons. The Eurozone, collectively, holds around 10,784 tons. 

These vast stores of physical gold are valued for their liquidity, security, and role in supporting national economic stability. In contrast, a hypothetical $200 billion Bitcoin reserve would represent less than 2.5% of current global gold reserves’ value—raising questions about its strategic impact.

How a Bitcoin reserve could be implemented

The newly elected Trump-Vance administration could issue an executive order directing the Treasury to allocate specific funds toward Bitcoin acquisition. 

In 2022, President 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 as currency, sidestepping certain regulatory hurdles.

A larger and sustained Bitcoin reserve would likely require Congressional approval, as it would involve multi-year budgeting. Even with Trump’s crypto-friendly stance, opposition from traditionalists within Congress, who might view Bitcoin as too speculative or risky for national reserves, could stall this proposal.

In operational terms, the US Department of Treasury could manage this reserve, similar to how it handles gold. Bitcoin would be acquired through diversified funds within the Federal Reserve System.

Implementing this initiative faces notable challenges, as Senate and House oversight would likely scrutinize the risk of adding such a volatile asset to the national balance sheet, especially with bipartisan concerns about cryptocurrency’s long-term stability. 

Proposal will unlikely be implemented over the next two years

With inflation concerns still a major issue, any plan involving Bitcoin could meet resistance from both the public and policymakers. But, more importantly, even a $200 billion Bitcoin fund would still be a fraction of the US debt, currently at $35.9 trillion. 

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It is unlikely that such a proposal would gather enough legislative support in the near term, even though executive orders can initiate limited government actions. In essence, large-scale asset purchases would demand Congressional cooperation, making a full-scale reserve unlikely within the next two years.

As the upcoming administration grapples with this proposal, the outcome will depend on a balance between economic strategy and political feasibility. For now, however, it appears that Bitcoin’s path to becoming a national reserve asset remains fraught with obstacles.