In the ongoing debate over a strategic Bitcoin reserve in the United States, a Fed official affirms the Fed’s legal restrictions on adding Bitcoin to its balance sheet, as debates heat up over a potential Bitcoin reserve.
Austan Goolsbee, president of the Federal Reserve Bank of Chicago, on January 31, 2025 clarified the institution’s hands are tied by law.
Legal Barriers to a Bitcoin Reserve
Goolsbee’s emphasized that the Fed is legally limited in what it can hold on its balance sheet. He noted that, under current law, Bitcoin is excluded from potential reserve assets.
This aligns with previous statements by Fed Chair Jerome Powell. He had confirmed that the Federal Reserve Act bars Bitcoin from the institution’s holdings.
Powell has also voiced concerns over Bitcoin’s reliability as a store of value due to its high volatility. He had first expressed his view on this in 2021.
Source | XThese legal limitations serve as an obstacle to any proposals for a national Bitcoin reserve.
The rules governing the Fed’s balance sheet are clear: only certain types of assets can be held, and Bitcoin does not currently meet the criteria.
This explanation by Goolsbee reinforces the regulatory framework. It has so far prevented the incorporation of digital assets into the Fed’s reserves.
The debate has captured attention from both the financial industry and cryptocurrency community.
In the wake of the Fed’s confirmation, discussions have intensified on platforms such as X and various financial news outlets.
Earlier, when the SEC dropped the controversial SAB-121 guidance, banks began offering cryptocurrency custody service.
It is a move that sparked reaction in the market. Following this, Bitcoin experienced a modest price increase, reflecting investor optimism despite the Fed’s restrictions.
Statistical data from recent market movements shows that Bitcoin’s price volatility continues to be a critical point of discussion.
Analysts note that while Bitcoin is often compared to digital gold, its price fluctuations remain a deterrent for conservative institutions.
This is evident in the Federal Reserve’s stance. The legal framework and regulatory concerns combine to maintain Bitcoin’s exclusion from the balance sheet.
State-Level and Global Initiative
Despite the federal stance, several U.S. states are exploring the concept of local Bitcoin reserves.
States like Texas, Florida, and Ohio are reportedly working on frameworks that might allow them to hold Bitcoin in a reserve capacity.
However, recent projections indicate that the probability of a national Bitcoin reserve being established by the end of April stands at only 16%.
Some expect that a broader reserve may be considered later this year. Internationally, the discussion takes on a different tone.
For instance, European Central Bank President Christine Lagarde has expressed confidence that Bitcoin will not be part of the European Union’s reserves.
He underscored the need for assets that are secure, liquid, and free from money laundering concerns.
In contrast, the head of the Czech National Bank has proposed allocating up to 5% of reserves in Bitcoin, highlighting a divergence in approach among global regulators.
While federal legal restrictions remain firm, the conversation is not static. Wyoming Senator Cynthia Lummis has emerged as a vocal advocate for a U.S. Bitcoin reserve.
Lummis, who recently took a leadership role in a Senate subcommittee on digital assets, stressed the importance of acting quickly to secure a competitive edge in the evolving financial landscape.
Her stance suggests that, while a national reserve is not on the immediate horizon, efforts at both the state and federal levels may evolve as the regulatory environment and market dynamics shift.
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