30s Summary

Senator Cynthia Lummis has proposed setting up a Bitcoin reserve, which could significantly change how the US manages its finances. Her suggestion comes after Trump’s re-election and has sparked concerns about potential impacts on the US debt and policies, as well as market volatility. The US traditionally depends on gold reserves to stabilize the dollar. If approved, this proposed $200 billion Bitcoin reserve could lead to an executive order directing the Treasury to invest in Bitcoin. However, the plan’s implementation might need Congressional approval, particularly given mixed views on cryptocurrency’s stability.

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Senator Cynthia Lummis, known as the “Crypto Queen”, has shocked everyone by saying she wants to set up a Bitcoin reserve. This news dropped right after Trump got re-elected and could really mix things up for how the US handles money. But, some people aren’t so sure about how realistic or even smart this idea is because it could impact the US debt, policies, and how risky the market can be.

Historically, the US has leaned on gold reserves to keep the dollar stable and strong. As of September 2024, the US has a whopping 8,133 metric tons of gold — that’s way more than Japan’s 845 tons and China’s estimated 2,113 tons. The Eurozone, with all its members combined, holds around 10,784 tons.

These massive amounts of gold are really valuable because they’re easily traded, secure, and help to keep the nation’s economy steady. But, a proposed $200 billion Bitcoin reserve would be less than 2.5% of what the global gold reserves are worth right now. So, it’s got people scratching their heads about if it’s even a good move.

If this plan goes ahead, the Trump administration could put out an executive order asking the Treasury to put funds towards buying Bitcoin. But, having a bigger and ongoing Bitcoin reserve might require the green light from Congress since it would mess with the budget for more than one year. Even with Trump’s positive attitude towards crypto, some old-school folk within Congress could cause a holdup. They might view Bitcoin as too unpredictable or risky to be counted as national reserves.

Actually making this happen isn’t a walk in the park either. Congress would probably want to check how risky it would be to add such an unstable asset to the nation’s books, given that there are differing views on if crypto is stable enough in the long term.

With the ongoing fight over inflation, any plan involving Bitcoin might face pushback from both the public and those in power. More than that, a $200 billion Bitcoin fund would still be a drop in the ocean compared to the US debt, which is now at $35.9 trillion.

So, it doesn’t look like this idea will get far right now, even though executive orders can get the ball rolling. Buying up big assets needs cooperation from Congress, so it’s unlikely we’ll see a full-scale reserve in the next two years.

As the incoming administration takes on this proposal, what happens next will depend on if it’s economically smart and politically possible. But for now, it seems Bitcoin becoming a national reserve asset is a road full of hurdles. Despite this, remember this is all just a possibility, and you should not take this as legal or investment advice. The thoughts and opinions shared here are only those of the author and do not represent the views of Cointelegraph.