Jerome Powell: Federal Reserve prohibited from holding Bitcoin

The Federal Reserve has dismissed the possibility of holding a Bitcoin reserve, citing legal and institutional limitations.

Fed Chair Jerome Powell reiterated this stance during a routine press conference following the year's final Federal Open Market Committee (FOMC) meeting, where the central bank announced a 25 basis point rate cut.

Despite growing interest in cryptocurrencies globally, Powell made it clear that the Fed is not authorized to manage a Bitcoin reserve and has no interest in pursuing legislative changes to enable such a move.

Bitcoin, already on a downward trend after the Fed’s rate cut announcement, fell to around $101,562 at the time of writing.

Powell’s statements underscore the continued reluctance of the US central bank to integrate Bitcoin into its monetary strategy, even as discussions about digital currencies gain traction under the leadership of newly elected President Donald Trump.

Source: CoinMarketCap

Scrutiny over Trump’s Bitcoin reserve proposal

Powell’s comments gained heightened attention because they followed President Trump’s controversial proposal for a national strategic Bitcoin reserve.

Supported by prominent figures such as Senator Cynthia Lumis, the initiative has been hailed by some as a forward-thinking strategy to diversify national reserves.

Critics, including crypto expert Nic Carter, warn that such a move could undermine the dollar’s global reserve currency status.

Carter, a founding partner at Castle Island Ventures, argued that a government-managed Bitcoin reserve could erode confidence in the dollar’s stability, especially amid heightened scrutiny of US fiscal policies.

This marks a significant divergence in policy perspectives, as the Fed remains committed to maintaining the dollar’s central role in global markets, while parts of the Trump administration appear willing to explore alternative reserve assets.

Analysts suggest that the proposal could create friction between regulatory institutions and the executive branch, further complicating the path toward integrating Bitcoin into federal financial frameworks.

Bitcoin’s price movements following Fed rate cut

Bitcoin’s price movements following the Fed's announcement and Powell’s remarks highlight the cryptocurrency market's sensitivity to regulatory developments.

The rate cut, aimed at stimulating economic growth, initially boosted investor sentiment but was quickly overshadowed by concerns about the Fed’s policy outlook.

The central bank’s repeated rejection of Bitcoin reserves reinforces skepticism about the broader adoption of digital currencies by mainstream financial institutions.

Market watchers note that Powell’s stance on Bitcoin is consistent with his previous comments, where he emphasized the speculative nature of cryptocurrencies and their unsuitability as reserve assets.

His remarks now carry added weight due to the political backdrop of Trump’s presidency and growing interest in blockchain technology within other government sectors.

The debate over Bitcoin’s role in US monetary policy is likely to continue as federal agencies navigate the balance between innovation and economic stability.

With global competitors like China advancing their digital currency strategies, the US faces pressure to clarify its position on integrating cryptocurrencies into its financial system.