Federal Reserve Chairman Jerome Powell has dismissed the idea of the Fed holding bitcoin, emphasizing legal constraints, as U.S. cryptocurrency policy and market dynamics rapidly change.
Why the Federal Reserve cannot—and will not—hold Bitcoin anytime soon
Federal Reserve Chairman Jerome Powell reiterated the central bank's stance on bitcoin during a press conference on Wednesday, following a rate cut. In response to a question about the U.S. government building a bitcoin reserve, Powell dismissed the possibility, citing legal constraints. He stated:
We are not allowed to own bitcoin. The Federal Reserve Act specifies what we can own, and we are not seeking a change in the law. That is the kind of issue that Congress needs to consider, but we are not seeking a change in the law at the Fed.
Powell's comments align with his historically cautious tone regarding cryptocurrency. In previous statements, he has referred to BTC as a speculative asset, lacking the stability to function as a legitimate currency. In 2021, Powell remarked that cryptocurrency "is not really useful as a store of value" and criticized their volatility, which poses risks for investors and the financial system. He has also distinguished between cryptocurrencies like bitcoin and central bank digital currencies (CBDCs), emphasizing the latter as a safer and more regulated initiative.
The Federal Reserve Act limits the central bank's holdings of U.S. government bonds and other high-quality assets. Although the Fed has expanded asset purchases during economic crises, including the 2008 financial crisis, cryptocurrency remains outside the Fed's scope. Meanwhile, legislative efforts such as Senator Cynthia Lummis's Bitcoin Act have sought to integrate bitcoin into the U.S. financial system. However, these proposals have faced opposition from lawmakers concerned about the lack of regulation of cryptocurrency and the potential for misuse.
Furthermore, President-elect Donald Trump announced plans to establish a national bitcoin reserve fund, aimed at positioning the U.S. as a global leader in cryptocurrency. This initiative involves the U.S. government acquiring a significant amount of bitcoin holdings, potentially utilizing seized assets from criminal cases as a foundation. This proposal has significantly impacted the cryptocurrency market, with bitcoin values exceeding $100,000, reflecting investor optimism about favorable regulatory changes under the upcoming administration. Additionally, Trump's appointment of David Sacks as White House AI and cryptocurrency advisor underscores his commitment to integrating digital assets into the national economic strategy.
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