This year has proven to be a pivotal one for the Bitcoin industry. Out of the gate, the Securities and Exchange Commission took the dramatic step of approving the first spot Bitcoin ETP following a decade of repeated denials. This groundbreaking development kicked off significant price appreciation in the gradually maturing asset by providing traditional market participants a relatively hassle-free vehicle to gain exposure.
Several months later, Wyoming Senator Cynthia Lummis dazzled a pro-Bitcoin audience at the annual Bitcoin Conference in Nashville, promising to introduce a bill establishing a “Strategic Bitcoin Reserve” for the United States through the Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide (“BITCOIN”) Act. Also at that conference was then-presidential candidate, Donald Trump, who vowed to ensure America becomes the “bitcoin superpower of the world.” With the recent election falling decisively on the side of the former President, his remarks at the conference are taking on renewed significance. And Senator Lummis is actively pushing her bill to the forefront of the conversation. Here are five highlights from the proposed BITCOIN Act.
1) One million bitcoins. That’s how many the bill authorizes the United States Treasury to acquire over a five-year period in order to stock the strategic reserve. And with the supply of Bitcoin programmatically capped at 21,000,000, the effect of achieving this number would be to ensure the United States controls 5% of all Bitcoin that will ever be created.
2) Gold has a role to play. Perhaps the only thing more impressive than buying 1 million bitcoins is using your gold reserve to stock your bitcoin reserve. And that’s exactly what this bill intends to do. It proposes to tap into the increase in value of the Federal Reserve System Gold Certificates over the last five decades to cover at least part of the cost of its bitcoin purchases. These certificates, issued in 1973 at a statutory value of $42.22 per fine troy ounce now have a fair market value of around $2,700.00 for the same amount of underlying gold. To access this price appreciation, the bill requires banks to return the certificates to the Treasury so that they can be reissued to “reflect the fair market value price of gold held against such certificates.” The banks must then “remit the difference in cash value between the old and new gold certificates to the Treasury for deposit in the general fund.” The profits can then be used to buy bitcoin for the Strategic Reserve.
3) Statutory Retention Period. To better “ensure the long-term stability and security of the Strategic Bitcoin Reserve,” any bitcoin acquired pursuant to the Act will be held for a period of “not less than 20 years.”
4) Proof of Reserves. Unlike traditional assets, the Bitcoin protocol allows for real time and cryptographically verifiable proof of ownership. The Act proposes to leverage this characteristic to encourage visibility and trust by requiring the Secretary of the Treasury to “publish quarterly reports on the Strategic Bitcoin Reserve that include detailed information on the total holdings, transactions, and demonstrated [ownership].”
5) State participation. The Act also allow for voluntary state participation so that states seeking to establish their own strategic reserves may do so “in a segregated account.”
It is unclear what level of traction the bill will get in the next legislative session. But with Bitcoin breaking through fresh highs in the days following the election, it is certainly possible legislators will give it a look.
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