Former Federal Reserve Bank of New York President Bill Dudley is cautioning against the proposed Bitcoin strategic reserve concept, stating that it would not benefit the American people in any way.
In a recent opinion piece on Bloomberg, Dudley, who also served as the vice chair of the Federal Open Market Committee (FOMC), pointed out that a BTC-backed reserve would only lead to higher inflation and increased national debt.
Dudley questioned the rationale behind establishing a Bitcoin reserve, stating that it would not provide any advantages to the government or individuals who do not hold Bitcoin. He emphasized that there is no clear exit strategy for such a reserve, which would essentially drive up inflation without creating any tangible value for the government.
According to Dudley, the government would be compelled to hold a volatile token that does not generate any revenue, leading to the need for either borrowing funds (resulting in higher debt servicing costs) or creating money through the Federal Reserve (exacerbating inflation).
Instead of pursuing a Bitcoin reserve, Dudley suggested that the Trump administration should focus on implementing regulations and laws that would enable the safe development and operation of cryptocurrencies. He highlighted the importance of defining whether tokens are considered currency or securities and establishing rules to safeguard consumers and prevent illicit activities such as financing terrorism or selling illegal drugs.
If the government truly wishes to support Bitcoin and the crypto industry, Dudley believes that it should prioritize creating a regulatory framework that fosters innovation while protecting the interests of all stakeholders.
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