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By Michael S. Derby, Ann Saphir
NEW YORK (Reuters) – Federal Reserve Chairman Jerome Powell said on Wednesday the U.S. central bank has no desire to participate in any government activity to hold large amounts of bitcoin.
“We’re not allowed to have bitcoin,” Powell said at a news conference following the Fed’s latest two-day meeting, where policymakers are expected to cut rates while signaling a more modest monetary policy in the coming months.
As for the laws surrounding bitcoin storage, “that’s the kind of thing that Congress needs to consider, but we’re not looking at changing the rules at the Fed,” Powell said.
The Fed chief spoke about the prospect of the central bank taking part in a proposal to build up the so-called Strategic Reserve when President-elect Donald Trump takes office.
Powell’s comments rattled the price of bitcoin, which has risen sharply along with other cryptocurrencies since Trump’s November election victory. 5 on the prospect of an increased government approach to a group of products that do not function as real money, but instead are used more as a speculative vehicle.
Trump has said he will create a US bitcoin strategic reserve. But the incoming president did not give details of what such a reserve would involve, beyond saying that his initial holdings would include bitcoins seized by criminals, reserves of 200,000 tokens worth about $21 billion at current prices.
Bitcoin has doubled this year to over $100,000 on hopes for Trump’s pro-crypto stance. The property has proven to be volatile in its 15 years, which experts say limits its use as a store of value or a place of exchange, the main interests of savings funds.
Republican Senator Cynthia Lummis introduced a bill to create such a repository, where the US Treasury would buy 200,000 bitcoins a year until the stock reaches one million tokens. The purchases can be paid for with Fed bank deposits and gold.
Issuing bitcoin reserves would require the approval of Congress and the issuance of new Treasury debt, according to an analysis published this week by. Barclays (LON:). Given how such a reserve would be created, “we suspect that such a system would be challenged by the Fed,” Barclays analysts said.
By and large, Fed officials have been skeptical of securities like bitcoin because they have also abandoned their efforts to create a digital dollar large enough to allow the private sector to develop payment technology.
The Fed’s main position regarding cryptocurrencies appears to be related to how the products could affect the safety of consumers and banks.
“We monitor and control the banks and we want a partnership between the crypto business and the banks… not to threaten the health and livelihood of the banks,” Powell said on Dec. 4. But he also said at that time. that in the case of crypto assets, “we do not directly manage.”
Trump plans to appoint former PayPal (NASDAQ:) executive David Sacks to the position where he created the White House AI and Crypto Czar, and pro-crypto advisor Paul Atkins to lead the Securities and Exchange Commission.
