The U.S. senator Cynthia Lummis recently proposed selling part of the Federal Reserve’s (Fed) gold reserves to purchase Bitcoin, seeing the cryptocurrency as an alternative with great growth prospects and security.
Let’s see all the details in this article.
Bitcoin: the “new gold” that could revolutionize the Fed’s reserves
According to what reported by Bloomberg, U.S. Senator Cynthia Lummis is promoting a bold proposal: selling a portion of the Federal Reserve’s (Fed) gold reserves to invest the proceeds in Bitcoin.
This idea reflects a vision increasingly shared among enthusiasts of criptovalute and some political leaders, according to which Bitcoin represents the future of safe havens, gradually supplanting the role that gold has traditionally occupied.
Lummis explained that, although gold has been a staple of safe-haven assets for centuries, the global financial landscape is changing rapidly, stating the following:
“Bitcoin, often referred to as ‘digital gold’, is attracting a growing number of investors thanks to its growth potential and the security it offers.”
According to her, the adoption of cryptocurrency by large institutions and its growing integration into financial markets demonstrate that Bitcoin can play a strategic role in national reserves.
The proposal of Senator Cynthia Lummis is therefore based on a global trend. Not surprisingly, the interest in cryptocurrencies has increased exponentially in recent years, driven by their ability to withstand inflation and their security based on blockchain.
However, the senator also acknowledged the risks associated with this class of volatile assets.
According to Lummis, diversifying the country’s reserves by investing in Bitcoin does not mean completely abandoning gold, but creating a balance that could offer advantages both in the short and long term.
Advantages and changes with Bitcoin
The analysts immediately questioned the feasibility and implications of such a proposal.
The Federal Reserve currently holds billions of dollars in gold reserves, considered a protection against economic fluctuations and currency crises.
The sale of these reserves to purchase Bitcoin would involve a radical change in the management of the country’s resources, exposing it to new market dynamics and to a volatility that gold does not present.
On the other hand, the supporters of Lummis’s proposal emphasize that Bitcoin has demonstrated remarkable resilience, overcoming regulatory challenges and periods of bear market to recover strongly.
In their view, the adoption of Bitcoin as part of the national reserves would send a clear message. Namely, that the United States is ready to innovate and lead the change towards a digital economy.
Furthermore, some experts highlight that the scarcity of Bitcoin, fixed at 21 million units, could offer an even greater protection against inflation compared to gold, whose value also depends on extraction policies.
Some critics of the proposal, however, warn against excessive enthusiasm for cryptocurrencies.
They indeed recall recent episodes of extreme volatility and the risk of lack of centralized control, factors that could damage national financial stability.
Furthermore, the security offered by the blockchain, although solid, is not immune to technological attacks or international regulation issues.
In conclusion, the proposal by Senator Lummis has sparked a debate on how the Federal Reserve should adapt to a rapidly changing world.
If Bitcoin really manages to earn a place among national reserves, it could mark the beginning of a new era for the American economy and for the role of digital money in the global financial system.
It remains to be seen whether this bold vision will find consensus among legislators and in more traditional financial institutions.
Source: https://en.cryptonomist.ch/2024/11/15/the-proposal-of-cynthia-lummis-sell-the-gold-of-the-fed-to-buy-bitcoin/