Former NY Fed chief blasts Trump’s Bitcoin reserve

Bill Dudley, the former head of the New York Fed, warned against holding Bitcoin as a reserve and urged a focus on regulation.

Dudley criticized a federal Bitcoin project (BTC) reserve defended by Donald Trump during his presidential campaign. In a Bloomberg opinion pieceDudley argued that the plan would not benefit most Americans and could destabilize the economy.

Dudley recognized Bitcoin’s appeal as a portable, decentralized asset that offers some diversification benefits for investors. However, he highlighted its volatility, slow transaction speeds, and limited real-world utility as significant drawbacks. “Bitcoin is hardly considered money,” Dudley wrote, pointing out that its lack of widespread acceptance as a means of payment and its vulnerability to loss make it an impractical choice for a national reserve.

The editorial also highlighted financial concerns. Establish a Bitcoin Reserve This would require substantial government borrowing or increased money printing by the Federal Reserve, Dudley argued, which could potentially spur inflation and increase debt servicing costs.

He warned that the reserve could primarily inflate Bitcoin prices, benefiting existing holders while providing little value to the general public.

The unsustainable surge in Bitcoin prices

Dudley pointed to an existing Congressional proposal that would require government purchases of one million Bitcoin over five years. He described the plan as an unsustainable plan to raise prices, with no clear exit strategy, leaving the government holding volatile assets that generate no revenue.

Rather than pursuing such policies, Dudley urged the Trump administration to focus on developing comprehensive regulations for the crypto industry. He suggested measures such as ensuring stable coins are fully backed by federal assets, defining the legal status of digital tokens and establishing rules to protect consumers while curbing illicit activity.

“Crypto technology has the potential to improve the financial system,” Dudley concluded, but without “strong safeguards, fraud and abuse will persist.”