Sen. Cynthia Lummis (R-WY) is planning a renewed push for legislation to set up a strategic bitcoin reserve, an idea that has gained traction since President-elect Donald Trump’s victory.
In an interview with the Washington Examiner, Lummis said she intends to reintroduce a bill that would form a strategic bitcoin reserve in January 2025. The senator previously introduced the BITCOIN Act, an ambitious piece of legislation that would form a strategic bitcoin reserve, earlier this year, but that did not attract co-sponsors. This time around, she is confident of the odds.
“It’s gaining momentum,” Lummis said. “The group that we need to focus on it is here on Capitol Hill, the members of the House and Senate.”
A strategic bitcoin reserve would be a U.S. reserve containing a large amount of the cryptocurrency. Specifically, Lummis’s plan would initiate a bitcoin purchase program with the goal of the United States acquiring a total stake of approximately 5% of total bitcoin supply — 1 million bitcoins, worth almost $100 billion in today’s prices.
Proponents say such a reserve could function as a hedge against inflation and prevent further devaluation of the dollar while maintaining global dominance in financial innovation. Critics, though, pan the idea as a solution in search of a problem and risky, given the volatility and uncertainty surrounding the relatively new asset class.
“The U.S. dollar is worth less every year by design. … We’ve got to find a way to shore up the U.S. dollar as the world’s reserve currency,” Lummis said. She added that if the crypto is held on to for some time, it could help reduce the national debt.
Bitcoin, by design, has its supply capped at 21 million coins. Proponents say the scarcity makes it a hedge against inflation. They argue that creating such a reserve could protect the U.S. against devaluation of the dollar.
“I think there’s certainly an opportunity here to leverage SBR to kind of reinforce the existing confidence in the U.S. Treasury market and the U.S. dollar right now,” Matthew Pines, national security fellow at the Bitcoin Policy Institute, told the Washington Examiner.
Bitcoin evangelists also see it as the future, and creating a national reserve may also be a way to get ahead of global competitors and be on the cutting edge of what has been a rapidly expanding industry and asset class. Lummis previously said such a move would be a “Louisiana Purchase moment” for the U.S.
There is some precedent for governments to directly purchase digital currencies or become involved with crypto. Most notably, the government of El Salvador holds bitcoin reserves.
“The country of Bhutan is engaged in bitcoin mining, although they have been selling some of the bitcoin they mine,” Josh Hendrickson, chairman of the economics department at the University of Mississippi, told the Washington Examiner. “However, we haven’t seen a large, developed county announce something like this.”
Hendrickson said one benefit of a reserve would be that it creates “option value” in case the U.S. ever wants to generate revenue without raising taxes.
But selling bitcoin would be final — so the question would be when, if ever, the government would want to exercise that option, according to Hendrickson.
“As government debt continues to grow, it becomes more likely that the government will have to resort to inflation to pay down the debt,” he said via email. “In that sort of environment, one would expect the price of things like gold and bitcoin to rise. Having a strategic bitcoin reserve would therefore serve as a hedge against the effects of rising government debt and also provide the government with the option to sell the bitcoin at these higher prices to pay down some of the debt.”
But there are some downsides to creating a strategic bitcoin reserve, one of which also relates to the strength of the dollar.
If the government made massive purchases of bitcoin to fill the coffers of a strategic bitcoin reserve, it could scare markets into thinking the U.S. is on a worse financial footing than previously realized and bring about a self-fulfilling expectation of rising inflation, Hendrickson said.
Lummis argued that the purchases could be paid for by diversifying existing funds within the Federal Reserve and the Treasury Department, including by converting some of the gold certificates held by the Fed into bitcoin.
Opponents of forming a strategic bitcoin reserve also contend that the bitcoin reserve just is not needed.
“I think there are bigger problems,” Norbert Michel, vice president of the libertarian Cato Institute, told the Washington Examiner.
Bitcoin, a relatively new asset class, is also extremely volatile and prone to massive swings up or down in value.
Trump, who once called bitcoin a “scam,” has done an about-face on bitcoin and crypto this election cycle.
“To the nation’s 50 million crypto holders, I say this: With your vote, I will keep [Sen.] Elizabeth Warren and her goons away from your bitcoin,” Trump told attendees at the Libertarian Party’s convention earlier this year, drawing a contrast to the Massachusetts Democrat, who is one of the industry’s biggest opponents.
Trump fully embraced the cryptocurrency industry and even called for the U.S. to hold on to the bitcoin it has seized in a “reserve,” but has stopped short of pushing for the government to actively accumulate the digital asset.
The idea of a strategic bitcoin reserve has gained steam following his election. Prediction markets are even weighing in, with Polymarket pegging the odds of Trump creating a national bitcoin reserve at about 42%, but specifics of such a plan and how far it would go are still highly speculative.
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Lummis pointed out that it is not just Trump who has embraced cryptocurrency, but also those close to him, such as Elon Musk, and some of his Cabinet nominees, such as Robert F. Kennedy Jr. The senator said she hopes momentum will translate into the formation of a strategic bitcoin reserve.
“In addition to that, the bitcoin community has been very significant on X and other platforms in generating enthusiasm support and the rationale behind a bitcoin strategic reserve,” she said. “So it’s gaining momentum.”