Emily Walker
Jerome Powell, the chair of the US Federal Reserve, has recently refuted rumors suggesting that the Fed might include Bitcoin in its reserves. Following a two-day meeting, Powell affirmed that the Fed cannot legally own Bitcoin and has no interest in joining any government project to accumulate digital assets.
This statement coincided with the Fed’s announcement of interest rate cuts and hints of unclear monetary policies in the upcoming months. Powell’s remarks took many by surprise, especially in light of President Donald Trump’s recent appointments of crypto-friendly individuals. The market reacted promptly to Powell’s comments, causing Bitcoin’s price to drop by 5.7%, while other major cryptocurrencies like XRP also experienced declines.
Powell Rejects Bitcoin Reserve Plans
Discussions about the possibility of a Bitcoin reserve gained momentum following Donald Trump’s electoral victory. Trump incorporated Bitcoin and other cryptocurrencies into his campaign strategy to garner support from the crypto community. With the appointment of notable crypto advocates in key government roles and plans to reform the SEC leadership, many anticipated the establishment of a Bitcoin reserve.
Powell states that the Fed cannot possess Bitcoin, and there are no plans to amend this situation
— ST Business Desk (@stbusinessdesk) December 18, 2024
However, Powell has firmly asserted that the US banking system is not permitted to hold Bitcoin. He cited restrictions outlined in the Federal Reserve Act, which specifies the types of assets banks can own, and Bitcoin is not one of them.
Powell indicated that there are no immediate plans to amend this regulation, leaving such decisions to Congress.
Growing Interest in Bitcoin as a Reserve Asset
Despite Powell’s stance on Bitcoin not being a viable reserve asset, interest in Bitcoin’s potential as such has been on the rise. During the elections, Trump advocated for Bitcoin and proposed that the US could lead in crypto innovations. Supporters of Bitcoin in politics, like Wyoming Senator Cynthia Lummis, have pushed for its recognition as a reserve asset.
Earlier this year, Lummis introduced legislation requesting the US Treasury to buy and incorporate Bitcoin into its reserves. The legislation proposes the Treasury purchase 20,000 BTC annually over five years, aiming for a total of 1 million Bitcoin in reserve.
Bitcoin’s Value Declines Following Powell’s Remarks
The market’s response to Powell’s statements was negative, resulting in Bitcoin’s price falling to $100,300, marking a decrease of approximately 5.7% compared to the previous day’s close. Currently, Bitcoin’s trading prices fluctuate between $98,839 and $105,306.
Other major cryptocurrencies followed Bitcoin’s downturn, with Ethereum decreasing by 6.8%, Solana by 8.1%, and Binance Coin by 4.6%. Dogecoin saw the largest decline among top altcoins, dropping to $0.348, which reflects an 11% loss. Additionally, the stock market also fell following Powell’s comments, with the Nasdaq 100 losing 2% and the S&P 500 closing down by 1.55%.
Featured image from Pexels, chart from TradingView