Former Chair of the Federal Reserve Issues Warning Regarding Bitcoin’s Status in US National Reserves

According to U.Today, Bill Dudley, the former chairman of the New York Federal Reserve, has expressed apprehension regarding the prospective incorporation of Bitcoin in the national reserves of the United States.

This year, the concept of a national Bitcoin reserve has garnered some support from policymakers and crypto enthusiasts, who contend that it could effectively diversify U.S. financial assets and serve as a hedge against inflation.

Subsequently, Dudley warns that although cryptocurrency technology may improve the financial system, a Bitcoin reserve may have unfavorable consequences.

Dudley elaborates that the inclusion of Bitcoin in national reserves could exacerbate government finances by accelerating inflation and leaving the government with volatile assets that do not generate income. He also cautions that such an action could be detrimental to the interests of the American people, as it could potentially undermine the dollar’s status as the global reserve currency.

Dudley contends that Bitcoin’s volatility renders it an unsuitable medium of exchange, as it is not a widely recognized currency in the majority of countries. He observes that Bitcoin transactions are both costly and slow, necessitating a substantial amount of energy and computing power to determine their validity.

Dudley recognizes that Bitcoin has some advantages, including its semi-anonymity and portability, despite these reservations. It is possible to store Bitcoin on a portable drive and transmit it globally without the need for traditional financial intermediaries or government-regulated banks.

Dudley observes that the establishment of a Bitcoin reserve could result in a significant increase in Bitcoin pricing as investors race to purchase in anticipation of government purchases. Nevertheless, he cautions that this could also exacerbate inflation, further complicating the financial landscape.

Also Read: China abandons Bitcoin reserve ambitions and buys gold after 6-month pause