Fed Dismisses Bitcoin Reserves: “Not in Our Legal Scope,” Says Powell

Following an interest rate drop on Wednesday, Federal Reserve Chair Jerome Powell forcefully reaffirmed the central bank’s stance on Bitcoin at a press conference. Powell clarified that legal constraints preclude the U.S. government from establishing a Bitcoin reserve when questioned about the prospect of doing so. He clarified:
“We are not permitted to possess Bitcoin. We don’t want to alter the Federal Reserve Act’s definition of what we can hold. Congress, not the Fed, should make changes to those laws.”

Powell’s remarks align with his long-standing cautious outlook on cryptocurrencies. In the past, he has described Bitcoin as a speculative asset, unsuited to serve as a stable currency. In 2021, he criticized its volatility, stating that Bitcoin is “not really useful as a store of value,” and expressed concerns about its risks to investors and financial systems. He also highlighted the difference between cryptocurrencies like Bitcoin and central bank digital currencies (CBDCs), emphasizing that CBDCs offer greater safety and regulatory control.

Under the Federal Reserve Act, the Fed’s holdings are limited to secure assets such as U.S. government bonds. While the central bank has broadened its asset purchases during economic downturns—like the 2008 financial crisis—cryptocurrencies remain outside its legal scope. Legislative proposals, such as Senator Cynthia Lummis’ Bitcoin Act, have attempted to integrate Bitcoin into the U.S. financial system. However, these efforts have met resistance from lawmakers concerned about the lack of crypto regulation and its potential misuse.

Donald Trump, the incoming president, has adopted a more assertive approach on digital assets. Trump has positioned the United States as a leader in the cryptocurrency field by announcing plans to create a national Bitcoin reserve. As a beginning point, this strategy may involve using confiscated assets from criminal cases to acquire substantial Bitcoin holdings.

Due to investors’ expectations of a more benevolent regulatory environment under the incoming administration, the idea has already caused a stir in the cryptocurrency market, pushing Bitcoin’s value above $100,000. Trump’s appointment of David Sacks as White House AI and Crypto Czar further solidifies this goal and demonstrates his administration’s dedication to incorporating digital assets into national economic policy.

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