Bill Dudley, former chairman of the Fed from 2009 to 2018, recently expressed his concerns about the proposal to create a Bitcoin (BTC) strategic reserve. He stated this in an opinion piece for Bloomberg.
The proposal in question originated during Donald Trump's election campaign. At that time, the now president-elect announced his full support for Senator Cynthia Lummis' project, which consists of the acquisition of one million bitcoins within a period of five years.
While Dudley acknowledges positive aspects of bitcoin, such as that it is possible to transfer it to anyone without relying on financial intermediaries, he warns that the creation of a strategic reserve of BTC would only benefit those who already own the asset.
According to the former FED chairman, this measure would only boost the price of the leading cryptocurrency and would not benefit the economy as a whole. In addition, the economist stressed that financing such a project would be very expensive, since doing so through debt or the issuance of money would result in an increase in the budget deficit or a higher inflation rate.
“Bitcoin cannot be considered money. Its volatility makes it a poor medium of exchange. In most countries, people have no business accepting it as a form of payment. Transactions are slow and expensive, and require a lot of computing power and energy to validate each one. Plus, if you lose your flash drive, you’ve lost your funds.”
Bill Dudley, former FED Chairman
The so-called financial specialist does not take into account that Bitcoin is actually a decentralized network, for the transfer of value between people, without requiring intermediaries. For these reasons, many consider Bitcoin valuable. Among its qualities, there are those who highlight it because it is portable, divisible, relatively scarce, cheap to store, secure, easy to hide or difficult to confiscate, and leaving aside volatility, it has no counterparty risk due to default or inflation.
In any case, Dudley believes that rather than creating a Bitcoin strategic reserve, the new government should prioritize developing robust regulations to ensure the proper functioning of the cryptocurrency sector. Dudley emphasized that without “robust regulation,” scams and abuses will continue to be present in the crypto space, hindering the “trust needed for the sector to translate its benefits into reality.”
«If the Trump administration is serious about supporting the cryptocurrency industry, it should work on a set of laws and regulations under which it can develop and operate safely. For example, it should ensure that stablecoins are fully backed by deposits at the Federal Reserve or short-term Treasury securities; it should also legislatively define whether tokens are currencies or securities, and who regulates them; and establish rules to protect consumers and prohibit the use of cryptoassets for criminal activities such as terrorist financing or the illicit sale of drugs.»
Bill Dudley, former FED chairman.
Bill Dudley, former Fed Chairman.
Meanwhile, Trump’s proposal has already resonated in several areas of the United States. Dennis Porter, CEO of the Satoshi Action Fund (SAF), recently commented that his team had started talks with Texas congressmen to get the state to start accumulating BTC reserves. This is also being promoted in Florida and Pennsylvania.
As far as countries are concerned, it is worth noting that in Brazil, Congressman Eros Biondini presented a bill to create a BTC reserve called RESBit. On the other hand, Chile has been blunt in declaring that it will not accumulate reserves in assets that it considers high risk.
