Fed's Powell: No Bitcoin for Us, Not Seeking Law Change

Federal Reserve Chair Jerome Powell has dashed hopes of the central bank adding Bitcoin to its balance sheet, stating that the Fed is not allowed to own the cryptocurrency due to legal restrictions under the Federal Reserve Act. Powell addressed the issue during a Dec. 19 press conference, emphasizing that the Fed is not pursuing any legislative changes to alter this position. "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," Powell said.

The Fed's stance aligns with its conservative investment approach, which prioritizes high-quality fixed-income assets to maintain economic and financial stability. Bitcoin, as a decentralized, volatile asset, does not meet these criteria. The Fed's primary mandate is to promote maximum employment, stable prices, and moderate long-term interest rates, which are at odds with Bitcoin's price fluctuations and lack of intrinsic value.

Powell's assertion has had a significant impact on the broader cryptocurrency market and investor sentiment. Bitcoin's price fell 5.9% to $100,605 following Powell's comments, reflecting investor uncertainty and a potential loss of confidence in Bitcoin as a reserve asset. The global cryptocurrency market capitalization also fell by 7.6% in the last 24 hours, indicating a broader market correction. Other major cryptocurrencies like Ethereum, XRP, and Solana also experienced significant losses, ranging from 4% to 11%.



Powell's comments may have contributed to this market pullback, as investors reassess the potential role of Bitcoin in central bank reserves. However, analysts at Santiment observed that Bitcoin's price remaining above $100,000 could be a sign of strength, suggesting that the market may stabilize once the dust settles.



The U.S. government establishing a strategic Bitcoin reserve, as proposed by President Trump, presents potential benefits and risks. Diversifying the nation's reserve assets, hedging against currency fluctuations, and signaling a commitment to innovation are among the benefits. However, risks include Bitcoin's volatility, regulatory uncertainty, and the potential for market manipulation. Additionally, the Federal Reserve, under Jerome Powell, has stated that it is not allowed to hold Bitcoin and is not seeking a law change, indicating that the central bank may not support such a move.

In conclusion, the Fed's stance on Bitcoin ownership is a reflection of its commitment to stability and predictability in the face of the cryptocurrency's volatility and decentralized nature. While the broader cryptocurrency market may experience short-term fluctuations, the long-term prospects of Bitcoin and other digital assets remain uncertain. Investors should focus on 'boring but lucrative' investments, such as Morgan Stanley, which offer steady performance without surprises.