Does the Federal Reserve Have The Power To Block The Bitcoin Reserve Plan?
Recently, Fed Chairman Powell made it clear that the Fed has no intention of participating in any government plan to accumulate Bitcoin.
He emphasized that such matters fall within the jurisdiction of Congress and that the Fed does not want to seek to change existing laws to allow the holding of Bitcoin. Powell’s comments immediately rocked the market, causing Bitcoin prices to fall sharply from the highs seen earlier this week. In addition, after Powell’s speech on the Polymarket platform, the probability of Bitcoin’s strategic reserve dropped from the peak of 40% on the 18th to 34%. Wu Blockchain Latest News postal Shared insights on whether the Federal Reserve can prevent the United States from establishing a national Bitcoin reserve.
Can the Fed Block the BSR Plan?
The U.S. Congress is the highest authority in the financial system, responsible for formulating regulations and authorizing agencies such as the Securities and Exchange Commission and the Federal Reserve to perform their functions. It should be noted that although the Federal Reserve enjoys a high degree of independence in monetary policy and national economic stability, it does not have “veto power” on the decision to establish the BSR.
Can Trump quickly establish BSR?
In order to quickly build a strategic reserve of Bitcoin, the Trump administration can issue an executive order requiring the U.S. Treasury Department to use the Exchange Stabilization Fund (ESF) to directly purchase Bitcoin. It is important to note that the operation of this fund is not controlled by Congress, and the President and the Treasury Department have considerable independence in its use.
This approach would avoid the need for congressional approval and reduce political opposition. However, the sustainability of this BSR is uncertain, as future administrations may revoke or modify the executive order.
Long term BSR
To establish a long-term and stable BSR, a more legal and stable way is to pass Congressional legislation to include Bitcoin in the Strategic Reserve Act or similar laws. This would formally recognize Bitcoin as a national strategic asset.
The U.S. Bitcoin Strategic Reserve Act proposed by Senator Cynthia Lummis, which is currently under review by the Senate Banking Committee, follows this line. However, this approach is more time-consuming and could face hurdles, as the bill must pass both the Senate and House of Representatives and be approved by the president. Regardless, the Treasury Department, not the Fed, will ultimately take the lead on implementing a Bitcoin reserve.
Is there a middle way?
The Fed and Treasury could also take a middle-of-the-road approach to Bitcoin allocation. The Fed can purchase Bitcoin through open market operations and add it to its balance sheet. However, given the Fed’s recent statements, this approach seems unlikely. On the other hand, the Treasury could set up a special fund to invest in Bitcoin as part of a fiscal investment plan, which would require congressional approval.
Nonetheless, the Fed’s “no” did not completely reject BSR’s proposal, and the Trump administration also expressed support through actions. While the Fed remains cautious, the Trump family’s actions illustrate the silent struggle between traditional power and market innovation.
