Federal Reserve Chair Jerome Powell has stated that the US central bank has no intention of participating in any government initiative to amass substantial bitcoin holdings.
Following the Fed’s most recent two-day policy meeting, where policymakers cut interest rates as anticipated but hinted at a less certain course for monetary policy in the coming months, Jerome Powell stated at a press conference, “We’re not allowed to own bitcoin.”
Regarding the legal concerns surrounding bitcoin ownership, Jerome Powell stated, “That’s the kind of thing for Congress to consider, but we are not looking for a law change at the Fed.”
The Fed boss was discussing the possibility of central banks getting involved in the government’s plan to establish a so-called Strategic Bitcoin Reserve under President-elect Donald Trump’s administration.
Jerome Powell’s remarks damaged Bitcoin’s value, which has risen significantly along with other cryptocurrency assets since Donald Trump won the election on November 5th on the promise of a less interventionist government toward a class of assets that are primarily used as a means of speculation rather than as real money.
Donald Trump plans to establish a strategic reserve of US bitcoin. Though the incoming president has stated that its initial holdings may include bitcoin seized from criminals, a stockpile of roughly 200,000 tokens worth about USD 21 billion at current prices, he has not elaborated on what such a reserve would entail. Basically, we are talking about Bitcoin getting promoted as a “Critical Resource” under the Republican’s watch and getting its own strategic reserve, which can be released at times of crisis or supply disruptions.
In 2024, Bitcoin has more than doubled to over USD 100,000 due to optimism about Trump’s pro-crypto stance.
Analysts claim that the asset’s volatility throughout its 15-year existence lessens its usefulness as a unit of exchange or store of value, two essential characteristics of a reserve currency.
Senator Cynthia Lummis, a Republican, has proposed legislation to establish such a reserve, which would allow the United States Treasury to purchase 200,000 bitcoins every year until there are one million tokens in the collection. This would represent about 5% of the total global supply of Bitcoin of around 21 million. The Treasury would fund the purchases with profits on Federal Reserve banks’ deposits and gold holdings. The Bitcoin reserve would subsequently be maintained for a minimum of 20 years.
Analysts and legal experts are, however, divided on whether Trump could use his executive powers to create the reserve, or whether an act of Congress would be necessary. Some have argued Trump could create the reserve via an executive order directing the United States Treasury’s Exchange Stabilisation Fund, which can be used to purchase or sell foreign currencies, and to also hold bitcoin.
“The reserve could include bitcoin that the government has seized from criminal actors. That stands at around 200,000 tokens, worth about USD 21 billion at the current price, according to bitcointreasuries.net. Trump suggested in a July speech unveiling his bitcoin reserve plan that this stockpile could be the starting point, although it remains unclear what the legal process would be for moving them out of the Justice Department,” Reuters reported recently, while explaining the “Bitcoin Reserve” in detail.
Trump has not made it clear whether his government, stated to take oath on January 20 2025, would add to the stockpile by buying more bitcoin in the open market. To do that, Trump 2.0 may have to issue debt, although some proponents of a bitcoin reserve say the world’s largest economy could sell some of its gold reserves and use the proceeds to buy bitcoin.
Crypto sceptics, however, say that, unlike most other commodities, bitcoin has no intrinsic use and is not crucial to the functioning of the American economy.