- Senator Cynthia Lummis’ BITCOIN Act proposes acquiring 1 million BTC as a national reserve asset.
- Bitcoin proponents view it as an inflation hedge, while critics challenge its role in economic stability.
The proposal to establish a U.S. strategic Bitcoin reserve has sparked controversy among traditional economists, with Steve Hanke emerging as a strong opponent.
Hanke, a professor of applied economics at Johns Hopkins University, has long been critical of Bitcoin, arguing that allocating national reserves to digital assets is economically unproductive.
In a recent interview, Hanke dismissed the idea, stating that capital should be invested in tangible assets rather than stored in Bitcoin, which he equated to holding classic artwork as a financial hedge.
A US BITCOIN STRATEGIC RESERVE = A STUPID IDEA.
Savings funneled into Bitcoin aren't building factories, creating jobs, or driving innovation. pic.twitter.com/VaH0p7Y835
— Steve Hanke (@steve_hanke) January 6, 2025
Following the reports in ETHNews, he argued that diverting capital into non-productive holdings could burden economic growth, emphasizing the importance of productivity-driven investments.
The Bitcoin Reserve Proposal: A Policy Dividing Economists
The Strategic Bitcoin Reserve proposal, introduced by Senator Cynthia Lummis, resurfaced following Donald Trump’s election victory. If enacted, the BITCOIN Act would authorize the purchase of 1 million BTC, capturing 5% of Bitcoin’s total supply as a strategic reserve asset, similar to gold reserves held by the U.S. government.
Proponents argue that Bitcoin’s fixed supply and decentralized nature provide a hedge against inflation and monetary instability, while critics, including Hanke, maintain that Bitcoin lacks intrinsic value and contributes little to economic productivity.
The Productivity Debate and Bitcoin’s Role in Economic Policy
Hanke’s opposition stems from concerns that reserving national wealth in Bitcoin does not contribute to productivity growth. He emphasized that economic prosperity is fundamentally tied to productivity expansion, warning that failing to prioritize real capital investments could weaken long-term economic stability.
Additionally, Hanke reiterated his longstanding skepticism of Bitcoin, arguing that it is not a functional currency and holds no fundamental value.
He has previously cited research linking cryptocurrency ownership to speculative behavior, further reinforcing his dismissal of Bitcoin as a viable reserve asset.
