U.S. Senator Cynthia Lummis’ proposal for a strategic Bitcoin reserve is unlikely to provide a solution to the nation’s mounting debt crisis, which currently stands at a staggering $35 trillion. One expert from a nonprofit research organization expressed skepticism about the practicality of using Bitcoin as a means to alleviate federal indebtedness during a discussion at the North American Blockchain Summit 2024 in Dallas, Texas.
While the idea of the U.S. government purchasing a substantial amount of Bitcoin , which could potentially appreciate in value, may sound appealing, it is insufficient to address the massive federal debt that has been growing almost exponentially since the 1980s. The expert emphasized that despite the potential benefits of a Bitcoin reserve, meaningful budgetary reforms are essential to tackle the ongoing annual federal deficits, which currently amount to around $2 trillion.
However, creating a Bitcoin reserve could provide some stabilization in the bond market by using Bitcoin to reinforce the value of the U.S. dollar. The move might instill confidence among investors, showing that the U.S. is taking steps to prevent a financial crisis. Nonetheless, there are concerns about the risk of depleting these Bitcoin reserves over time, drawing parallels to the way the U.S. managed its gold reserves in the 1970s.
Since 1981, the national debt in the U.S. has seen a compounded annual growth rate of 5.3%, ballooning from $3.81 trillion to its current figure of $35.46 trillion. In July, Lummis introduced the Bitcoin Act, proposing that the government acquire one million BTC — approximately 5% of the total supply — and maintain these holdings for at least two decades. Additionally, she suggested that the U.S. Treasury consider converting a portion of its gold reserves into Bitcoin to bolster this strategic reserve initiative.
