Nikolas Sargeant
In a definitive statement during Wednesday's FOMC press conference, Federal Reserve Chair Jerome Powell clarified that the central bank has no authority to hold Bitcoin in its reserves, emphasizing that such decisions fall under Congressional jurisdiction.
Federal Reserve's Limited Scope on Cryptocurrency
"We are not allowed to own Bitcoin," Powell stated firmly, addressing speculation about potential government cryptocurrency holdings. "That's the kind of thing for Congress to consider." The Fed chair's comments came alongside the announcement of a 0.25% interest rate reduction, bringing the target range to 4.25-4.50%.
Powell's stance aligns with the Federal Reserve Act's restrictions, which limit the central bank to holding government bonds and prohibit highly speculative assets. Despite the Fed's historical flexibility during economic crises, such as the 2008 financial crash, Bitcoin remains outside its operational scope. The central bank's position reflects longstanding policies regarding asset holdings and risk management strategies.
Contrasting Visions for Bitcoin's Role
The Fed chair's perspective on Bitcoin has remained consistent, characterizing it as a speculative asset that competes more with gold than the U.S. dollar. His previous statements from 2021 highlighted concerns about cryptocurrency's volatility, questioning its effectiveness as a value store. Powell has repeatedly distinguished between cryptocurrencies like Bitcoin and central bank digital currencies (CBDCs), emphasizing that the latter offers greater security and stability within the traditional financial framework.
Trump's Strategic Reserve Proposal Meets Federal Reality
The timing of Powell's clarification is particularly relevant given President-elect Donald Trump's recent suggestions about establishing a U.S. Bitcoin strategic reserve. Trump's comments on CNBC, where he declared, "We're gonna do something great with crypto," drew parallels to the U.S. Strategic Petroleum Reserve and helped drive Bitcoin to unprecedented heights above $106,000. This proposal has sparked intense debate within financial and political circles about the future role of cryptocurrency in national reserves.
Market Response to Federal Reserve Stance
Following Powell's statements, Bitcoin experienced a 5.17% decline, settling just above $100,000. The cryptocurrency market's response coincided with broader market movements, as the Fed's rate adjustment contributed to a 2% decrease in the Nasdaq 100. The immediate market reaction demonstrates the continuing influence of traditional financial institutions on cryptocurrency valuations.
The current trading price of $101,170 reflects ongoing market adjustment, while major altcoins including XRP, Cardano's ADA, and Litecoin's LTC have seen more substantial declines, dropping approximately 10% over 24 hours. These movements highlight the interconnected nature of cryptocurrency markets and their sensitivity to regulatory statements.
