Federal Reserve Steers Clear of Bitcoin Stockpiling
The US central bank has made it clear that it has no interest in getting involved in government efforts to accumulate large amounts of bitcoin. Federal Reserve Chair Jerome Powell emphasized that the Fed is not permitted to own bitcoin, and any changes to this policy would require Congressional action.
A Hands-Off Approach
Powell’s comments come as President-elect Donald Trump has floated the idea of creating a Strategic Bitcoin Reserve, which has sparked concerns among central bankers. Trump has suggested that the reserve could be funded by bitcoin seized from criminals, with an initial stockpile worth around $21 billion. However, Powell has made it clear that the Fed is not looking to change its stance on bitcoin ownership.
A Volatile Asset
Bitcoin’s value has more than doubled this year, driven by optimism over Trump’s pro-crypto stance. However, its volatility has raised concerns about its utility as a store of value or unit of exchange. Analysts argue that these attributes are essential for a reserve currency, making bitcoin a less-than-ideal candidate.
Congressional Approval Needed
Any efforts to create a Strategic Bitcoin Reserve would likely require Congressional approval and the issuance of new Treasury debt. According to an analysis by Barclays, such a plan would face significant resistance from the Fed.
Global Skepticism
Central bankers in Europe have also expressed skepticism about the idea of bitcoin reserves. The European Central Bank’s chief bank supervisor, Claudia Buch, has flagged up risks in the crypto market, including excessive leverage and conflict of interest. Other European central bankers have dismissed the idea of bitcoin becoming a reserve asset, citing its volatility and lack of stability.
Regulatory Focus
The Fed’s primary concern regarding cryptocurrencies appears to be their potential impact on consumer and banking sector safety. Powell has emphasized the need for careful regulation and supervision of banks’ interactions with the crypto business. However, he has also made it clear that the Fed does not directly regulate crypto assets.
A New Era for Crypto Regulation?
Trump’s plans to appoint a White House AI and Crypto Czar, as well as a pro-crypto consultant to lead the Securities and Exchange Commission, have raised questions about the future of crypto regulation. While some see this as a positive development, others are more cautious, citing the need for careful consideration of the risks and benefits associated with cryptocurrencies.
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