TechFlow reports that on December 6, former New York Fed President Bill Dudley said bitcoin's price has risen more than 40% since Trump won the U.S. presidential election, partly due to hopes he would support establishing a government bitcoin reserve. He backed this idea during his campaign, and pro-crypto lawmakers have also proposed ways to achieve it. It's hard to imagine how this would benefit most Americans.
But what benefit does creating a bitcoin reserve bring to the government or to people who don't hold bitcoin? None at all. With no exit strategy, the aim would be to fuel inflation rather than create value for the government—which would be forced to hold volatile tokens that generate no income. To fund the purchases, the Treasury would either have to borrow (thereby increasing debt servicing costs) or the Federal Reserve would have to create money (worsening inflation). The latter is nearly equivalent to the Fed monetizing U.S. government debt (similar to how Congress legislating that the Fed use proceeds from the government’s gold reserves would be). If the Trump administration truly wants to support the emerging cryptocurrency industry, it should establish a clear legal and regulatory framework enabling it to develop and operate safely. (Kitco)
