Powell: Fed not allowed to own Bitcoin

Jerome Powell, the Chairman of the U.S. Federal Reserve, once again reiterated the central bank’s stance on Bitcoin, firmly stating that the Federal Reserve is legally prohibited from owning Bitcoin or holding a Bitcoin reserve. His comments were made during a press conference after the Federal Open Market Committee (FOMC) meeting, where the Fed announced a 25 basis point cut to interest rates.

Powell explained that the current legal framework does not authorize the Federal Reserve to acquire or manage Bitcoin, making it clear that the central bank is not interested in pursuing any legal amendments that would enable it to create a Bitcoin reserve. He emphasized that the U.S. central bank does not see any need to manage Bitcoin as part of its monetary policy operations or asset holdings. These remarks were largely a reaffirmation of the Fed’s position on digital assets, which has been consistent in recent years.

This isn’t the first time Powell has made these comments. He has repeatedly expressed the Fed’s disinterest in holding Bitcoin in previous post-FOMC meetings, stating that the bank’s role is focused on traditional monetary policies and financial systems. However, Powell’s remarks this time may have garnered extra attention due to the timing of his statements. With the recent election of Donald Trump as the 47th President of the United States, Trump has proposed creating a national strategic Bitcoin reserve as part of his economic policy agenda. This plan has gained significant support from some lawmakers, such as Senator Cynthia Lummis, and from several figures within the cryptocurrency industry. Trump’s proposal is aimed at securing a U.S. government-managed stockpile of Bitcoin, which he argues could serve as an important financial asset for the country.

However, Powell’s comments highlight the skepticism and caution within traditional financial institutions regarding the integration of cryptocurrencies into national reserves. Some experts, like Nic Carter, a founding partner of Castle Island Ventures, have expressed concerns that creating a U.S.-managed Bitcoin reserve could undermine the confidence in the U.S. dollar. These critics argue that such a move could raise doubts about the stability of the dollar and its position as the world’s primary reserve currency. They believe that mixing Bitcoin, a highly volatile and speculative asset, with national monetary policy could destabilize the financial system.

Powell’s remarks came at a moment of heightened volatility in the cryptocurrency markets, with Bitcoin experiencing a notable decline following the Fed’s interest rate decision. Bitcoin dropped 2.1% within an hour of Powell’s comments, falling to around $101,400 at the time of writing. This price movement was further influenced by the Fed’s interest rate cut, which is seen as part of the central bank’s strategy to stimulate economic growth and curb inflation. Despite the Fed’s decision, the market responded with caution, especially in the context of Powell’s continued reluctance to embrace Bitcoin or other digital assets as part of the central bank’s strategy.

In summary, while Powell’s stance on Bitcoin is not new, the political and economic context in which his comments were made has brought additional attention to the topic. With proposals like Trump’s national Bitcoin reserve gaining traction, the debate around the role of cryptocurrencies in national financial systems is likely to continue. However, the Federal Reserve remains firm in its position that Bitcoin does not belong in its asset portfolio, citing legal and practical concerns.