đŸ€‘ Gold for Bitcoin? Fed’s Cautious Wink at Crypto Dreams đŸ€‘

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In the grand theater of financial folly, where governments play with numbers as if they were mere playthings, a new act has unfolded. The Federal Reserve, that august institution of monetary wisdom, has deigned to cast its gaze upon the proposal to finance a US Strategic Bitcoin Reserve (SBR) by re-marking the Treasury’s gold hoard to market. Ah, the irony! The verdict, delivered with the gravitas of a senior economist, is as cautious as a maiden aunt at a ball. In “Official Reserve Revaluations: The International Experience,” Colin Weiss, a man of numbers and little mirth, reviews five historical cases where governments, in their infinite wisdom, tapped unrealised gains on gold and foreign-exchange reserves. What folly, one might exclaim, to think such maneuvers could solve the ills of a nation! 😏

“With public debt at high levels,” Weiss pens, as if stating the obvious to a room of sleeping grandfathers, “some governments have begun to explore financing additional expenditures without raising taxes while also not increasing public debt outstanding. One possibility is using proceeds from valuation gains on gold reserves, as has been floated in the US and Belgium recently.” Ah, Belgium! The land of waffles and fiscal ingenuity! 🧇

The Fed’s Half-Hearted Nod to Bitcoin

For Washington, the arithmetic is as dazzling as a fireworks display on the Fourth of July. Revaluing the Treasury’s 261.5 million troy ounces of gold from the statutory price of $42.22 to the current market level-about $3,300-would unlock roughly $850 billion, an amount the Fed note pegs at “about 3 percent of US GDP.” What a windfall! Enough to make even the most frugal senator’s eyes gleam with avarice. This treasure has become the darling of Senator Cynthia Lummis’ BITCOIN Act, introduced last year, which proposes to create a federal stockpile of up to one million bitcoins over five years. A million bitcoins! One can almost hear the crypto enthusiasts cheering, their keyboards clacking in unison. đŸ’»

Yet, the Fed paper, ever the voice of reason in a sea of madness, stops short of policy advocacy. Its survey is hardly a love letter to those who see reserve revaluation as fiscal free money. In every precedent-the 1997 German episode, Lebanon in 2002, Italy in 2002, Curaçao and St Martin in 2021-22, and South Africa last year-“drawing on revaluation proceeds may not address larger structural challenges,” Weiss warns, citing Lebanon’s rising debt ratio even after using gold gains to retire Treasury bills. Ah, Lebanon! A cautionary tale of financial hubris. đŸ‡±đŸ‡§

Crucially for the market, the note acknowledges the Bitcoin dimension in a footnote that has drawn wide attention on Capitol Hill. “In the US, the idea has come up in the context of helping to establish a strategic bitcoin reserve or a sovereign wealth fund, and the use of revaluation proceeds was proposed in recent legislation by Senator Lummis.” Though tucked away as an aside, this reference marks the first time a Federal Reserve publication has explicitly analyzed the mechanics underpinning a Bitcoin reserve bill. A historic moment, indeed, though one wonders if history will remember it with a laugh or a sigh. 😂

Lummis’s 118th-Congress proposal-formally the Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act-would “establish a Strategic Bitcoin Reserve 
 to ensure the transparent management of Bitcoin holdings of the Federal Government,” according to the bill text. Transparency! A noble goal, though one suspects the government’s transparency is as clear as mud. đŸŒ«ïž

Under Section 5, the Treasury would be authorized to purchase up to 200,000 Bitcoin a year-capped at one million coins, about five percent of eventual supply-while a 20-year minimum holding period would shield the cache from political meddling. Section 6 mandates quarterly cryptographic “proof-of-reserve” attestations, and Section 7 would consolidate forfeited Bitcoins held by agencies such as the US Marshals Service into the new vault network. Funding, of course, relies heavily on the gold revaluation gambit: Section 9 instructs the Federal Reserve Banks to tender their gold certificates for re-issuance at fair-value prices and diverts up to $6 billion a year of Fed remittances through 2029 to offset the purchase program. A financial juggling act, if ever there was one! đŸŽȘ

Notably, Bo Hines, the executive director of the President’s Council of Advisers on Digital Assets, has also repeatedly mulled the option to revalue gold to buy more Bitcoin in a budget-neutral way as instructed by US President Donald Trump’s executive order from March 6. “If it’s budget-neutral and doesn’t cost the taxpayer a dime, we’ll see whatever creative ideas we can come up with,” Hines said. Creative ideas, indeed! One wonders if they will also consider selling the White House lawn to fund the next grand scheme. đŸ›ïž

At press time, BTC traded at $114,776. A number so lofty, it makes one’s head spin. đŸŒȘ

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2025-08-07 15:08