By Michael S. Derby and Ann Saphir
NEW YORK (Reuters) – Federal Reserve Chair Jerome Powell said on Wednesday that the U.S. central bank does not want to get involved in any government efforts to accumulate large amounts of bitcoin.
“We are not allowed to own bitcoins,” Powell said at a news conference following the Federal Reserve’s latest two-day policy meeting, in which authorities cut rates as expected, while also signaling a path forward. less certain for monetary policy in the coming months.
In terms of the legal issues surrounding holding bitcoin, “those are the kinds of things Congress needs to consider, but we’re not looking for a law change at the Federal Reserve,” Powell said.
The head of the Federal Reserve was referring to the possibility of the central bank participating in the idea of the government building the so-called Strategic Reserve once President-elect Donald Trump takes office.
Powell’s comments put a dent in the value of bitcoin, which has rallied strongly along with other crypto assets since Trump’s victory in the Nov. 5 election on the prospect of a more hands-off government approach to an asset class that It rarely functions as real money, but is largely used as a vehicle for speculation.
Trump has suggested that he will create a strategic reserve of bitcoins in the United States. But the incoming president has not provided details about what such a stockpile would entail, beyond saying that his initial holdings could include bitcoins confiscated from criminals, a stockpile of around 200,000 tokens worth around $21 billion at current prices. .
Bitcoin has more than doubled this year to over $100,000 on optimism over Trump’s pro-crypto stance. The asset has proven volatile in its 15 years of existence, which analysts say reduces its usefulness as a store of value or unit of exchange, key attributes of a reserve currency.
Republican Senator Cynthia Lummis has introduced a bill to create such a reserve, under which the US Treasury would purchase 200,000 bitcoins annually until the reserve reaches one million tokens. The purchases would be financed with Federal Reserve bank deposits and gold holdings.
Funding a strategic bitcoin reserve would likely require congressional approval and the issuance of new Treasury debt, according to an analysis published this week by Barclays (LON:). Given the likely ways such a reserve could be created, “we suspect such a plan would face strong resistance from the Federal Reserve,” Barclays analysts said.
More broadly, Federal Reserve officials have been skeptical of securities like bitcoin, as they have also backed away from their own efforts to create a fully digital dollar in favor of allowing the private sector to innovate in payments technologies. .
The Federal Reserve’s primary role with respect to cryptocurrencies appears to focus on how those assets could impact consumer and banking sector security.
“We regulate and supervise banks and we want the interaction between the cryptocurrency business and banks… to not threaten the health and well-being of banks,” Powell said on December 4. But he also noted at the time that when it comes to cryptoassets, “we don’t regulate them directly.”
Trump plans to appoint former PayPal (NASDAQ 🙂 executive David Sacks to the newly created White House AI and Crypto Czar position, and pro-crypto consultant Paul Atkins to lead the Securities and Exchange Commission.
