Avik Roy, chairman of the non-profit think tank - the Foundation for Opportunity, stated that Senator Cynthia Lummis of the Republican Party, who proposed the BTC Reserve Act, believes that including BTC in the national strategic reserve can eliminate the U.S. national debt, which is "an exaggeration of the function of BTC."
According to Cointelegraph reports, Roy said bluntly at the North American Blockchain Summit held in Texas yesterday (20th):
"When Senator Cynthia Lummis of Wyoming talks about how BTC reserves can help us eliminate federal debt, this is an exaggeration of the function of BTC."
U.S. Think Tank: BTC National Reserves Cannot Solve the U.S. Debt Crisis
He believes that the U.S. purchasing "a large" amount of appreciating BTC may be helpful to the U.S. finances, but this cannot make up for the $35.46 trillion debt that has grown almost exponentially since the 1980s.
Over the years, the U.S. debt crisis has been escalating, and it even came close to the default red line in mid-2023, until the two parties in Congress negotiated and passed an increase in the existing U.S. borrowing limit threshold of $31.4 trillion for two years, which is expected to expire in January 2025, which means that Trump will immediately face the trouble of raising the debt ceiling upon taking office. Roy emphasized:
"BTC reserves are good, but they don't solve the problem, you still need to actually reform the budget and get us out of the $2 trillion federal deficit every year."
But he also believes that including BTC in the national strategic reserve may help alleviate the tension in the bond market, "At least we have the ability to support enough dollars with BTC to make the bond market feel that the U.S. won't go bankrupt." However, he also worries that such an arrangement may lead to the U.S. constantly eroding these BTC reserves, just like the government's treatment of gold reserves in the 1970s.
Note, after the 1950s, the U.S. continuously issued the U.S. dollar to fill the fiscal deficits of the Korean War and the Vietnam War, and governments around the world rushed to sell the U.S. dollar and buy gold, until the 1970s, the U.S. gold reserves had shrunk to the point where it could no longer bear the obligation to exchange the U.S. dollar for gold, leading to the collapse of the Bretton Woods system.
Will BTC Become a U.S. Reserve Asset?
Senator Lummis proposed the "2024 BTC Strategic Reserve Act" at the end of July, which continues to spark debate. The bill requires the Treasury Department to develop a "BTC purchase plan" to purchase up to 200,000 BTC per year within five years, reaching a total of 1 million BTC (about 5% of the current BTC supply). These BTC will be held for at least 20 years, and can only be sold during that time to repay U.S. debt, and after that, no more than 10% of the assets can be sold in any two-year period.
Trump, who will return to the White House next year, publicly promised this year at the BTC conference that he will establish a U.S. BTC strategic reserve.
Based on the current BTC price, the U.S. establishing a 1 million BTC reserve would require at least $90 billion in funding. Where does the money come from? Lummis, the initiator of the bill, recently suggested that it could be done by selling part of the Federal Reserve's gold reserves, without increasing the government's deficit, to establish a BTC reserve.
Further Reading: If Trump Establishes a BTC Strategic Reserve, It May "Self-Destruct" the U.S. Dollar's Hegemonic Position... A Big Gift to China and Russia
Perspectives
Some experts are pessimistic about Trump's prospects of including BTC in the U.S. strategic reserve, not only does the Barclays analyst believe the probability is slim, but BitMEX founder Arthur Hayes also said the plan is difficult to achieve.
You need to understand that this plan requires a certain number of votes, and when voting, people need to consider the impact of this plan on the U.S. Treasury Department and the Federal Reserve, because they always have to maintain the stability of the U.S. debt market.
Christian Catalini, co-founder of the failed Diem / Libra stablecoin project at Facebook, warned that in the worst case, establishing a BTC strategic reserve would show doubts about the U.S. dollar and the U.S.'s sustainable debt repayment capacity, which is a terrible strategic mistake, equivalent to giving a big gift to Russia and China, who have long been trying to undermine the global dominance of the U.S. dollar.
The official Chinese media Economic Daily recently analyzed that the change in the attitude of some Americans towards BTC "is an attempt to maintain the already weakened international status of the U.S. dollar." And it believes that the unstable nature of BTC may bring greater challenges to regulators, and may also intensify frictions in the international financial field. Whether the U.S. economy, which has been eroded by high inflation for many days, can withstand its impact remains to be seen.
Meanwhile, asset management giant BlackRock reported this week that with Trump's victory, there may be a "new sense of optimism" for Bit strategies, and top VC Paradigm also recently said on its blog that the "global race to establish Bit reserves has begun."
