A former Fed president is warning that the proposed Bitcoin (BTC) strategic reserve concept will not provide any positive benefit to the American people.
Bill Dudley, former president of the Federal Reserve Bank of New York and ex-vice chairman of the Federal Open Market Committee (FOMC), says in a new op-ed on Bloomberg that the incoming Trump administration’s proposal for a BTC-backed reserve is zero percent has. positive points.
Dudley says the main effect of a Bitcoin reserve would be higher inflation and increased national debt.
“But what benefit does setting up a Bitcoin reserve have for the government or for those who don’t own Bitcoin?
No.
There is no exit strategy, so its purpose is to drive up inflation rather than create value for the government – the government would be forced to hold a volatile token that generates no revenue. To provide the funds for purchases, the Treasury Department must either borrow (which increases the cost of debt service) or the Federal Reserve must create money (which exacerbates inflation).
The latter is almost indistinguishable from the Federal Reserve monetizing the US government debt (in the same way it would also be the case to order the Federal Reserve to use the government’s gold reserves based on congressional bills) .
The former Fed boss says that if the Trump administration really wants to support Bitcoin and the crypto industry, it must enact laws and regulations that “enable it to develop and operate safely.”
Specifically, Dudley says the government should try to determine whether tokens are currency or securities, and create rules to “protect consumers and prohibit their use for activities such as financing terrorism or selling illegal drugs.”
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