Debate Ignites Over U.S. Strategic Bitcoin Reserve Proposal

Federal Reserve Chair Jerome Powell stated that the Fed is not interested in stockpiling bitcoin, leaving the decision to Congress. This comes amid Trump's suggestion of a U.S. strategic bitcoin reserve. Analysts question the viability due to bitcoin's volatility and the Fed's likely resistance.

Federal Reserve Chair Jerome Powell announced on Wednesday that the U.S. central bank has no plans to participate in any government initiative to accumulate significant amounts of bitcoin. During a press conference after the Fed's recent policy meeting, Powell clarified that the central bank is not permitted to own bitcoin and highlighted that legal deliberations over bitcoin holdings should be a matter for Congress.

The discussion arises as President-elect Donald Trump floated the idea of establishing a Strategic Bitcoin Reserve. Powell's comments tempered market enthusiasm for bitcoin, which had surged post-election amid speculation of Trump's supportive stance toward cryptocurrencies. However, details about the reserve remain elusive, with Trump indicating that it might start with assets seized from criminal activity.

The proposal, championed by Republican Senator Cynthia Lummis, suggests annual purchases of 200,000 bitcoins by the U.S. Treasury, funded through Fed bank deposits and gold reserves. Yet, such a plan would require congressional approval and the issuance of new Treasury debt. Analysts, including those at Barclays, foresee resistance from the Fed, which remains skeptical of cryptocurrencies and favors private sector innovation in payment technologies.

(With inputs from agencies.)