How will the Bitcoin Federal Reserve work?
Bitcoin prices have soared this year thanks in part to the president-elect Donald TrumpMessages about creating a file Crypto-friendly management – Including plans to store volatile digital currency.
in July conferenceTrump said holding onto the country’s bitcoin holdings would create a “permanent national asset to benefit all Americans” and help make the United States a leader in the global cryptocurrency space. Some are pushing the incoming administration to go a step further by creating a strategic bitcoin reserve, arguing that building the country’s cryptocurrency assets would help the government pay off its debts.
Here’s what we know so far about Trump’s plans for cryptocurrency stocks, and what it could mean for taxpayers.
How will bitcoin stock work
The United States already holds nearly $20 billion worth of Bitcoin obtained through legal seizure, according to The Verge. Cryptocurrency tracking company Arkham Intelligence.
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Federal officials It will sell sometimes Cryptocurrency, but Trump has shown interest in it Stop future sales To create an “underlying” stock of Bitcoin.
“For too long, our government has violated the cardinal rule that every Bitcoin user knows by heart: Never sell your Bitcoin,” Trump said in July.
So far this year, Bitcoin’s price has risen more than 100%.. By avoiding future sell-offs, the United States can help keep Bitcoin prices high, benefiting existing investors.
“If you restrict supply to the overall market in real time, it helps not to suppress the price,” he said. Seoyoung Kimauthor of “DeFi For Dummies” and associate professor of finance at Santa Clara University.
But some believe the government needs to do more than just hold its current cryptocurrency, and are pushing to create a strategic bitcoin reserve similar to the gold and oil reserves held by the US government.
Republican Sen. Cynthia Lummis of Wyoming earlier this year introduced a bill that would see the country gain, over time, 1 million Bitcoinor about 5% of the tokens, to hold for at least 20 years. To finance the purchase, the government will revalue gold certificates worth about $11 billion on the Federal Reserve’s balance sheets.
Loomis said creating a Bitcoin reserve could help the United States reach $36 trillion National debt Strengthening the US dollar.
“While there may be short-term volatility, a Bitcoin reserve like this will serve as an important and stable store of value over the long term,” Loomis wrote in a letter. Published in the Wall Street Journal.
Trump suggested that Bitcoin reserves would help the United States compete with other countries in the field of cryptocurrencies.
“We’re going to do something great in crypto because we don’t want China or anyone else — not just China, but others adopting it — and we want to be ahead of the curve,” Trump said. he told CNBC earlier this month.
Other countries with significant Bitcoin holdings as of Thursday afternoon include China ($18.5 billion), the United Kingdom ($6 billion), Ukraine ($4.5 billion), Bhutan ($1 billion), and El Salvador ($582 million), according to For BitcoinTreasuries data site.
But some cryptocurrency experts say the United States does not need a strategic reserve to remain competitive.
“I would rather see regulatory clarity around all digital assets moving forward,” he said. “To me, that benefits the US economy more than potentially holding volatile assets in reserve.” michelle netz, Visiting Professor at the University of San Francisco and founding director of the Center for Law, Technology, and Social Good.
Bitcoin reserve:Bitcoin declines after Powell says the Fed is “not allowed” to own the cryptocurrency
What are the risks associated with the Bitcoin Federal Reserve?
Building a stockpile would be easy for the president, said Owen Lau, a senior analyst at Oppenheimer & Co. The government will simply stop selling its bitcoin. But financing the strategic reserve will be sufficient It will likely require congressional approval – The probability of this happening is believed to be low.
“I haven’t heard enough support for creating something like this,” he said. “Taking (the stock idea) one step further to actively buy and sell bitcoin would be risky and difficult to justify to the public.”
There are concerns about cryptocurrency wallets being vulnerable to cyber attacks and Bitcoin prices falling. While the digital currency is hovering near record levels, it has suffered significant declines in the past, for example falling by more than 70% between November 2021 and November 2022.
“If bitcoin goes up, you stand to profit from it. If bitcoin goes down, taxpayers lose the value of that trade,” Lau said.
The Barclays analysis said financing the Bitcoin Strategic Reserve would likely require issuing new treasury debt, according to Reuters. The bank suspects that such a plan “faces strong resistance from the Fed.”
When asked about a potential Bitcoin reserve at a news conference on Wednesday, Federal Reserve Chairman Jerome Powell said Wednesday that the central bank is I’m not looking to hold Bitcoin.
“We are not allowed to own bitcoin. The Federal Reserve Act stipulates what we can own, and we are not seeking to change the law.” Powell said. “That’s something Congress should consider, but we’re not looking to change the law at the Fed.”
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2024-12-20 01:33:00
