Powell’s comments, made during a press conference following the Federal Open Market Committee (FOMC) meeting, also underscored broader skepticism toward government-managed Bitcoin reserves.
Bitcoin and Federal Law
Addressing the media, Powell clarified, “The Federal Reserve Act specifies what we can own, and Bitcoin is not part of that list. We’re not looking for a law change at the Fed—that’s a matter for Congress.” These remarks were reiterated in response to speculation about a potential U.S. strategic Bitcoin reserve following President-elect Donald Trump’s campaign suggestions.
Trump has suggested creating a government-controlled Bitcoin reserve to be seeded with assets seized in criminal activity. The U.S. holds almost 200,000 Bitcoins, worth more than $20 billion, according to CoinGecko. Yet Powell said he didn’t think that would work, reflecting the Fed’s overall wariness about digital assets.
Market Reaction and Bitcoin Volatility
The price of Bitcoin, which had risen in recent weeks in anticipation of Trump’s more crypto-friendly position, nosedived following remarks by Powell. During trading sessions, the cryptocurrency’s value slid by over 5% to fall below $98,000. Other major losers were Dogecoin, Ethereum, and Binance Coin, indicating the nature of the market, which is very volatile.
Source: BNC Bitcoin Liquid Index (BLX)
The value of the entire cryptocurrency market has nearly quadrupled to over $3.8 trillion since the Nov. 5 U.S. election, with Bitcoin surging 50%.
Legislative Push for Bitcoin Reserve
Republican Senator Cynthia Lummis has championed the idea of a US Bitcoin reserve, proposing legislation that would authorize the Treasury to purchase 200,000 bitcoins annually until a target of one million tokens is achieved.
These purchases would be financed by the Fed’s profits and gold reserves. Opponents, including Barclays analysts, said such a plan would be strongly opposed by the Fed and would need Congressional approval.
Broader Fed Skepticism on Digital Assets
Powell’s remarks reflect the Federal Reserve’s broader reservations about cryptocurrency. While acknowledging their potential impact on financial systems, the Fed has refrained from directly regulating digital assets or pursuing its own central bank digital currency. “Our primary concern is ensuring the health and stability of the banking sector in its interactions with the crypto industry,” Powell noted earlier this month.
Source: X
The central bank continues to prioritize conventional economic goals like controlling inflation and keeping an eye on the labor market. In addition to announcing a quarter-point interest rate drop, which raised the goal range to 4.25–4.5%, the FOMC also indicated that future monetary policy changes would be handled more cautiously.
Could Bitcoin ever become a part of the Federal Reserve’s strategic arsenal? The answer is a resounding no, as the Fed firmly states its mandate doesn’t extend to digital assets like Bitcoin—even as debates swirl in Congress and beyond. Whether lawmakers or the Trump administration push for a strategic Bitcoin reserve remains uncertain, but the Fed is staying on the sidelines.
