Federal Reserve Chair Jerome Powell said on Wednesday that the U.S. central bank has no desire to participate in any government initiative to accumulate a large amount of bitcoin.
“We’re not allowed to own bitcoin,” Powell stated during a press conference following the Federal Reserve’s latest policy meeting. Policymakers decided to cut rates as anticipated, while also indicating an less certain monetary policy path in the months ahead.
Addressing legal issues surrounding bitcoin ownership, Powell noted, “That’s a matter for Congress to consider, but as for the Fed we are not seeking a legal change.” These comments directly address the potential involvement of the central bank in plans to construct a Strategic Bitcoin Reserve, a concept that has been discussed in light of the upcoming administration.
Powell’s remarks caused a dip in the value of bitcoin, which had shown a strong rally along with other crypto assets since the election, fueled by the prospect of a less regulated government approach towards these assets. Bitcoin is frequently used for speculation rather than as actual currency.
While the president-elect has suggested creating a U.S. bitcoin strategic reserve, details remain scarce. There is an idea that holdings could potentially come from confiscated assets from criminals, a stockpile of approximately 200,000 tokens, valued at around $21 billion at current prices.
Bitcoin’s value has more than doubled this year, soaring past $100,000, driven by optimism regarding the incoming Presidential stance on cryptocurrency. Analysts highlight the asset’s volatility, which could hinder its use as a reliable store of value or a unit of exchange. These features are essential for a reserve currency.
Republican Senator Cynthia Lummis introduced a bill proposing the creation a reserve. Within this bill, the U.S. Treasury would purchase 200,000 bitcoins annually until the stockpile reaches one million tokens. The purchases would depend on funding from Federal Reserve bank deposits and gold reserves. Barclays analysts suggest that funding a strategic bitcoin reserve would likely require Congressional approval in addition to the issuance of new Treasury debt, which may face resistance from the Fed.
Furthermore, Federal Reserve officials have expressed skepticism about bitcoin. They have also reduced their own efforts to develop a fully digital dollar, opting instead to permit innovation in private payment technology. The Fed’s involvement with cryptocurrencies is primarily focused on the potential effects of these assets on consumer and banking sector safety. “We regulate and supervise banks and we would want the interaction between the crypto business and the banks … not to threaten the health and well-being of the banks,” Powell said. “We don’t regulate them directly.”
European Central Bank’s chief bank supervisor, Claudia Buch, also highlighted risks in the crypto market, including “excessive leverage, intransparency, and conflicts of interest.” She added that she is closely monitoring banks’ exposure to crypto assets.
In Europe, multiple central bankers have dismissed bitcoin-as-reserve asset proposals. Similarly, Belgium’s central bank governor Pierre Wunsch indicated little “appetite for having reserves in bitcoins.” Outside the euro zone, Hungary’s governor-designate Mihaly Varga shared that cryptocurrencies were too volatile.
“We are following the discussion, especially in the U.S. post-elections, closely,” ECB policymaker Olli Rehn said. “But our view has not changed. Cryptos are assets, but they are not currency.”
