Can Gold Fund Bitcoin Puchases

Senator Cynthia Lummis’s "Bitcoin Act 2025" has drawn significant market attention regarding its feasibility. The bill proposes a plan for the U.S. government to acquire one million Bitcoin in stages by using the revaluation gains from gold owned by the U.S. Treasury.

For the bill to pass, it must secure majority approval in both the Senate and the House of Representatives. The Senate (100 seats) is currently composed of 53 Republicans, 45 Democrats, and 2 Independents. The House (435 seats) consists of 220 Republicans and 215 Democrats.

If Senate Democrats deliberately delay the bill's introduction by invoking a filibuster, at least 60 votes will be required to proceed. This makes it practically impossible to pass the bill without Democratic cooperation.

If the bill does not pass, current law prevents the U.S. Treasury from acquiring Bitcoin through gold revaluation.

The United States currently holds 8,133 tons of gold, which is under the ownership of the U.S. Treasury. In 1934, in response to the Great Depression, the Gold Reserve Act was enacted to prevent gold outflows. The key provision of this law was to transfer all gold held by the Federal Reserve and private entities to the Treasury.

During the Great Depression, a trade deficit led to gold outflows to Europe, restricting the issuance of dollars and amplifying deflationary pressures.

President Franklin D. Roosevelt sought to halt gold outflows and increase the dollar supply by transferring the Federal Reserve’s gold to the Treasury. He then revalued gold, generating approximately $3 billion in revaluation gains, which enabled the issuance of additional dollars. This severely weakened the gold standard.

In exchange for the transferred gold, the Federal Reserve received Gold Certificates. These certificates were not direct claims on physical gold but rather an accounting mechanism for the Federal Reserve.

The purpose of transferring the Federal Reserve’s gold to the Treasury was to eliminate accounting constraints. Under current law, the Federal Reserve cannot recognize gold revaluation gains as an increase in its assets, as this would compromise central bank independence.

The Federal Reserve would then have a greater ability to issue dollars in proportion to the revaluation gains. Recognizing this, the government may attempt to pressure the central bank into increasing fiscal expenditures.

In 1971, the Nixon Shock officially ended the U.S. gold standard.

In 1974, the Congressional Budget and Impoundment Control Act was enacted to prevent the Treasury from freely utilizing revaluation gains from gold. The law mandates that all federal government revenue and expenditures must be approved by Congress.

President Donald Trump has the executive authority to revalue the gold stored in Fort Knox. However, using the resulting revaluation gains to purchase Bitcoin is an entirely separate matter.

Some flexibility exists. One alternative would be to incorporate gold revaluation gains into the Federal Reserve’s balance sheet. However, this approach would likely spark a contentious debate over whether Congressional approval is required.

As it stands, acquiring Bitcoin through gold revaluation is virtually impossible unless Senator Lummis’s bill is passed. If Democrats support the bill, it would signal their willingness to allow gold revaluation gains to be used for fiscal purposes. If they oppose it, it would reaffirm their stance against such financial maneuvers.

During the recent Crypto Summit, President Trump stated, "We need high-IQ, smart people." This was no joke. He genuinely recognizes the need for brilliant minds to navigate this complex economic challenge.

One can only hope that Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick are indeed the "high-IQ, smart people" Trump had in mind.