WHAT IS THE STRATEGIC BITCOIN RESERVE?

“THE BITCOIN ACT of 2024, introduced by Senator Cynthia Lummis of Wyoming, seeks to firmly establish Bitcoin as a strategic asset in the United States’ financial arsenal. At its core, the Act proposes the creation of a Strategic Bitcoin Reserve (SBR) and a structured Bitcoin Purchase Program, and comprehensive national custody policy.”

The Strategic Bitcoin Reserve (SBR)
“The establishment of the SBR signifies a paradigm shift in how the United States government manages and custodies Bitcoin at the Federal level. The SBR creates a decentralized network of secure Bitcoin storage facilities across the United States.”

Bitcoin Purchase Program
“The Act lays out a plan to acquire up to 1,000,000 Bitcoins over a five-year period, capping purchases at 200,000 Bitcoins annually, and then holding such reserves for twenty years. Furthermore, the Act places limits on the use and sale of the reserve following the holding period.

During the minimum holding period, no Bitcoin held by the Federal government in the SBR may be sold, swapped, auctioned, encumbered, or otherwise disposed of for any purpose other than retiring outstanding Federal debt instruments.”

RE-READ THAT LAST STATEMENT- ” or otherwise disposed of for any purpose other than retiring outstanding Federal debt instruments.”

“It first proposes an amendment to the Federal Reserve Act to reallocate discretionary surplus funds from the Federal Reserve Banks. This reduces the discretionary surplus funds from $6.825 billion to $2.4 billion. The Federal Reserve is then required to remit net earnings to the Treasury, and the Act redirects the first $6 billion towards purchasing Bitcoin.”

“Furthermore, the Act also involves an adjustment in the valuation of gold certificates held by the Federal Reserve. Currently, the Federal Reserve holds gold certificates which are marked at $42.22/oz, while the market price of gold is closer to $2,400 today.

Essentially, this forces the Federal Reserve to mark-to-market the gold certificates, then remit the gain on the gold to the Treasury for the purpose of funding the initial acquisition.”

COULD THIS BE THE REVALUATION OF GOLD THAT WE HAVE BEEN LOOKING FOR?
REPRICING THE GOLD CERTIFICATES HELD BY THE US TREASURY AT THE NEW PRICE OF $2400/OZ

State Participation
The Act contemplates accepting State-level Bitcoin holdings into the national framework through voluntary participation. This aspect allows individual states to store their Bitcoin holdings within the SBR in segregated accounts.

By offering this option, the Federal government allows (but does not require) States to add Bitcoin to their own treasuries, without having to reinvent and reimplement a robust security plan.

States participating in the program maintain exclusive and segregated title to their Bitcoin, and the right to withdraw or transfer their Bitcoin holdings from the SBR, subject to the terms of their contractual agreement and any applicable Federal regulations, but are not subject to the Federal restrictions otherwise applicable to the SBR.

This flexibility ensures that States can manage their Bitcoin treasuries in accordance with their specific financial strategies and needs.

Implications & Next Steps
“By tapping into existing financial resources and leveraging the economic value of gold, the BITCOIN Act aims to acquire Bitcoin without directly burdening taxpayers or increasing federal debt. This multifaceted approach underscores the innovative financial strategies the Act employs to integrate Bitcoin into the national reserve system, setting the stage for a comprehensive Bitcoin policy throughout all levels of the United States government.”

@ Newshounds News™

Read more: Bitcoin Magazine

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Bank of England looks to update RTGS by exploring wholesale CBDC, synchronization

The central bank of the United Kingdom is proposing experimenting with a wholesale central bank digital currency (wCBDC) as it seeks to update its Real-Time Gross Settlement (RTGS) system.

Bank of England (BoE) announced the move in a discussion paper, titled “The Bank of England’s Approach to Innovation in Money and Payments.”

Under this, the BoE promised to undertake a series of experiments within the next six months to examine wCBDC settlement compared to the “synchronization” of non-CBDC central bank money using the existing RTGS system.

RTGS is a fund transfer system that allows for the instantaneous transfer of money and/or securities between banks. In the U.K., the RTGS system is called the Clearing House Automated Payment System (CHAPS). It’s operated by the BoE and used for high-value transactions.

The BoE has been consulting on an update to CHAPS since 2022. In February 2023, in its Roadmap for the Real-Time Gross Settlement Service Beyond 2024, the bank proposed “synchronization” as a possible solution to updating its RTGS system, which suffered a well-publicized crash earlier in July.

“We proposed to create a generic interface into RTGS which would allow a wider range of ledgers to connect to RTGS to synchronize transactions. Synchronization enables ‘atomic settlement’, which means linking the transfer of two assets in a way that one asset moves if and only if the other asset moves,” said the roadmap.

Wholesale CBDCs—digital versions of a country’s currency used by banks and financial institutions for large-scale transactions and settlements—offer another alternative to the current RTGS system, with 19 countries already piloting one.

Both synchronization and wCBDC depend on distributed ledger technology (DLT), a system that records transactions across multiple computers or locations.

In its July 30 discussion paper, the BoE argued that “further work is required to consider the respective roles these innovations might play in the Bank’s future toolkit. To inform this work, the Bank proposes a program of experiments to test the use cases, functionalities and prospective designs of both wCBDC and synchronization, and their relative merits.”

It added that these experiments would ideally assess the relative operational risk and complexity involved in using the two technologies and how different types of financial assets can best be represented on a digital ledger.

“This would help identify important ledger design considerations and inform later workaround interoperability,” said the discussion paper. “The experiments should also allow us to assess the scalability of the different approaches.”

In terms of its ultimate goal, the BoE set out three main outcomes it hopes to achieve from the experiments:

1. Central bank money must keep pace with technological advances in financial markets and must be equipped with the functionality to support central bank money settlement of tokenized wholesale transactions;

2. Innovations in financial markets must be harnessed in a way that supports financial stability and monetary policy objectives. “If tokenization increases the efficiency and speed of post-trade processes, this could release liquidity and reduce settlement risk and cost in wholesale financial markets,” said the BoE;

3. The U.K.’s financial market infrastructure must remain at the forefront of developments in finance, including maintaining an appropriate level of interoperability with new DLT-based infrastructure.

@ Newshounds News™

Read more: Coin Geek

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2,200 letters of support for ‘Bitcoin Strategic Reserve’ bill sent to US senators

Senator Cynthia Lummis introduced the bill on July 31, which would direct the US government to start a reserve Bitcoin fund.

Over 2,200 letters were sent to United States senators in 48 hours urging them to co-sponsor and support Senator Cynthia Lummis’s newly proposed Strategic Bitcoin Reserve bill.

In a post on X, Lummis expressed gratitude for the support given to the Strategic Bitcoin Reserve bill.

Lummis, a prominent advocate for the crypto industry, introduced the Bitcoin Strategic Reserve bill on July 31. The bill aims to establish a national reserve of Bitcoin and position the US as a leader in the adoption and secure management of the world’s first cryptocurrency.

The proposed legislation would direct the US government to create a decentralized network of secure Bitcoin vaults managed by the US Treasury, ensuring strict cyber and physical security measures.

@ Newshounds News™

Read more: Coin Telegraph

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Peru inaugurates first CBDC pilot

Peru’s central bank has launched its first central bank digital currency (CBDC) pilot, selecting local telecom operator Viettel Peru as its partner.

The Central Reserve Bank of Peru announced the partnership recently but didn’t disclose any details about the pilot. Viettel is the local subsidiary of Vietnam’s state-owned multinational telecom operator Viettel Group, which started operating in Peru in 2014.

For Peru, a digital sol is the country’s attempt to digitize payments to enhance efficiency and cut costs. The government is also seeking to boost financial inclusion; according to the latest studies conducted two years ago, only half of Peruvians had access to formal financial accounts.

While this was a significant growth from 2014, when the World Bank revealed that only two in ten Peruvians were banked, it’s still relatively low for a country with a $242 billion gross domestic product (GDP). In stark contrast, 85% of neighboring Chile’s population is banked.

With close to half its population unbanked, Peru is heavily reliant on cash. According to the International Monetary Fund (IMF), high costs and insufficient digital infrastructure remain vital impediments.

IMF believes that a CBDC could eliminate many of the barriers to digital payments. However, the Latin American country would have to make some critical considerations, such as offering the digital solution via USSD, as a large portion of the population doesn’t own a smartphone.

It would also need to dissociate CBDC from the banking system, as the people who need it most don’t have bank accounts. In most countries, the CBDC wallet is linked to a bank account, allowing convenience, as customers can switch between the two easily. This allows the regulators to impose a holding cap—once a customer hits this threshold, the rest is converted to conventional bank deposits.

@ Newshounds News™

Read more: Coin Geek

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