- Peter Schiff warns that Senator Lummis’ Bitcoin reserve aim could trigger inflation by increasing the Federal Reserve’s money supply.
- Schiff questions Bitcoin’s suitability as a reserve asset, focusing its volatility and instability compared to traditional reserves.
- Economist Justin Wolfers criticizes Lummis’, noting that the argument for the Bitcoin reserve lacks clarity and understanding.
Peter Schiff has raised concerns over Senator Cynthia Lummis’ need to establish a U.S. strategic Bitcoin reserve. The known economist argues that the plan, which involves acquiring 1 million Bitcoin over the next 20 years, would require the Federal Reserve to bring more money into circulation, leading to inflation.
Schiff Questions Bitcoin’s Stability as a Reserve Asset
Schiff’s criticism centres on the financial decision made by Lummis’ proposal. He stated that the “Senator’s plan is to create inflation to buy Bitcoin,” expressing concern that the approach could destabilize the economy.
The proposed legislation, titled “Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide Act,” or the BITCOIN Act, aims to enhance the strength of the U.S. dollar while addressing national debt. The bill outlines that $6 billion would be allocated from net earnings remitted by the Federal Reserve to the Treasury between 2025 and 2029 to fund the Bitcoin purchases.
Other than the inflation risk, Schiff expressed his doubts in Bitcoin’s suitability as a reserve asset. He pointed out that a reserve asset should possess low volatility, efficiency, and stability that Bitcoin does not have. His comments follow a period of significant decline in Bitcoin’s value, further fuelling doubts about its ability as a reserve asset.
Economist Wolfers Joins Schiff in Criticism
Moreover, Schiff is not alone in his criticism. Justin Wolfers, an economist at the University of Michigan, also expressed himself about Lummis’ plan. He described the Senator’s reasoning behind the bill as a perplexing argument, noting that it does not have clarity and understanding
Schiff’s remarks, together with similar concerns from other economists, suggests that Lummis’ proposal may face rejection as it moves forward. The debate emphasizes the broader controversy surrounding Bitcoin’s role in the U.S. financial system and its potential risks.
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