Powell Slams Door on Fed Bitcoin Holdings

Key Takeaways

• Federal Reserve Chair Jerome Powell has ruled out the possibility of holding Bitcoin on the Fed's balance sheet.
• Powell’s comments align with his historically cautious stance on cryptocurrencies, which he views as speculative and volatile.
• The announcement led to a market-wide correction, with Bitcoin dropping 6% to $98,500 and the global crypto market losing 7.6% of its value.

Federal Reserve Chair Jerome Powell addressed the possibility of the U.S. central bank holding Bitcoin during a press conference on December 19. 

Markets React as Powell Dismisses Fed Bitcoin Plans

Powell emphasized that the Federal Reserve Act legally restricts the central bank from owning cryptocurrencies. He stated, “We’re not allowed to own Bitcoin. The Federal Reserve Act says what we can own, and we’re not looking for a law change.”

​​https://twitter.com/coinwaft/status/1869479064668619107

Powell remarked in response to questions about President-elect Donald Trump’s proposed Strategic Bitcoin Reserve initiative.

He further clarified that altering this position would require congressional action, something the Federal Reserve is not pursuing. 

Legal barriers under the Federal Reserve Act prevent the central bank from holding assets like Bitcoin, limiting its portfolio to U.S. government bonds and highly secure financial instruments.

Following Powell’s remarks and the Federal Reserve’s announcement of a 25 basis point rate cut, Bitcoin experienced a significant downturn. 

The cryptocurrency fell 5.9% to $100,705, retreating from its record high of $108,000 reached on December 18. 

Other cryptocurrencies, including Ethereum, XRP, and Solana, faced losses between 6% and 10%, contributing to an 8.6% decline in the global crypto market capitalization, which is now at $3.52 trillion.

$780M Liquidated in the last 24 hours/Source:CoinGlass

Powell’s additional comments on a more hawkish monetary outlook, including projections for only two more rate cuts in 2025 and a higher inflation target of 2.5%, further spooked investors. 

Despite the correction, blockchain analytics platform Santiment noted that Bitcoin’s resilience above $100K could signal underlying strength.

Fed Chair Stance on Crypto Amid Developments on Strategic Bitcoin Reserve in the U.S.

Powell’s current stance on Bitcoin holdings by the Fed aligns with his long-standing cautious tone on cryptocurrencies. 

He has previously criticized Bitcoin as a speculative asset unsuitable for stable monetary functions. 

Fed's Powell: bitcoin is used as a speculative asset and it is a competitor with gold, not the US dollar pic.twitter.com/mG6ZeWHrXS

— unusual_whales (@unusual_whales) December 4, 2024

In contrast, Powell has shown more favor toward central bank digital currencies (CBDCs), which he views as safer and more controllable.

Despite Powell’s dismissal, legislative proposals like Senator Cynthia Lummis’ Bitcoin Act and President-elect Trump’s plans to establish a national Bitcoin reserve have gained attention. 

These initiatives aim to position the U.S. as a global leader in cryptocurrency by acquiring significant Bitcoin holdings, potentially using seized Bitcoin worth approximately $21 billion.

However, critics argue these proposals face hurdles, including regulatory uncertainty and concerns about crypto’s potential misuse.