Powell: Fed Cannot Hold Bitcoin, No Plans to Change

Jerome Powell, the US Federal Reserve chair, made it clear on Dec 18 that the Fed has no intentions of holding Bitcoin in its reserves. In a press conference following the Fed’s latest policy meeting, Powell stated, “We’re not allowed to own Bitcoin.” He emphasized that any legal considerations surrounding Bitcoin ownership should be addressed by Congress, as the Fed is not seeking to change its stance on this matter.

Powell’s remarks made an impact on the value of Bitcoin, as the cryptocurrency has experienced a significant surge in value amid optimism surrounding President-elect Donald Trump’s pro-crypto stance. Trump has proposed the creation of a US Bitcoin strategic reserve, but has not provided detailed information on what this would entail. However, he did mention the possibility of including Bitcoin seized from criminals, valued at about US$21 billion at current prices, as part of the reserve.

Bitcoin’s value has more than doubled this year, exceeding US$100,000, largely due to the positive sentiment surrounding Trump’s support for cryptocurrencies. Despite this, analysts point out that Bitcoin’s volatility over its 15-year history diminishes its utility as a stable store of value or a reliable unit of exchange, which are essential characteristics of a reserve currency.

Republican Senator Cynthia Lummis has proposed a bill to establish a strategic Bitcoin reserve, with the US Treasury purchasing 200,000 bitcoins annually until the stockpile reaches one million tokens. The funding for this reserve would likely require congressional approval and the issuance of new Treasury debt, according to an analysis by Barclays. However, Barclays analysts anticipate resistance from the Fed towards such a plan.

Overall, Federal Reserve officials remain cautious about securities like Bitcoin and have steered away from efforts to introduce a fully digital dollar, preferring to let the private sector lead innovations in payment technologies. The Fed’s primary focus with regard to cryptocurrencies is to ensure that these assets do not pose a threat to consumer and banking sector safety.

As we navigate this rapidly evolving landscape of digital currencies and government policies, it will be interesting to see how the conversation around Bitcoin ownership and strategic reserves continues to unfold. Stay tuned for more updates on this topic.