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Former Fed Chief Slams Bitcoin Act of 2024, Warns of Market Risks

Published by
Debashree Patra

Bill Dudley, former president of the Federal Reserve Bank of New York and current chair of the Bretton Woods Committee, has rejected the idea of Bitcoin (BTC) becoming a government reserve currency.

In his recent Bloomberg op-ed on December 6, Dudley said that adopting Bitcoin as a reserve currency would bring no real advantages and would mostly benefit current Bitcoin holders pushing for this proposal.

After Dudley’s comments, Bitcoin’s price dropped by 4.31% to $98,854, having recently peaked at a record high of $103,900. While Dudley acknowledged Bitcoin’s ability to transfer money without intermediaries, he emphasized that its extreme volatility makes it a poor choice as a stable reserve fund.

Bitcoin Act of 2024: A Risky Proposal?

Dudley’s comments are a direct response to the Bitcoin Act of 2024, introduced by Senator Cynthia Lummis. The bill proposes creating a strategic Bitcoin reserve and implementing transparency measures for managing BTC holdings. Some supporters see this bill as a way to push Bitcoin into mainstream global finance, but others, including Dudley, see it as a risky move.

Dudley warned that adopting this bill could drive up Bitcoin’s price without benefiting the government or economy. He also raised concerns about the absence of a clear exit strategy. According to him, this could leave the U.S. government stuck with volatile assets that generate no income.

Economic Risks to Consider

Dudley provided a detailed economic analysis to back his concerns. He pointed out that even a 2% allocation of global investment portfolios—estimated at around $250 trillion—would push Bitcoin’s price to an astounding $250,000 per coin. If the U.S. government increased this allocation to 4%, Bitcoin’s price could double, creating a speculative bubble that could destabilize global markets.

His analysis highlighted the risks of Bitcoin’s volatility, arguing that the market could experience dangerous instability.

Let’s Focus on Regulation Instead

Rather than promoting Bitcoin as a reserve currency, Dudley urged the Trump administration to focus on regulating the crypto industry. He suggested ensuring that stablecoins are fully backed by U.S. treasury bills, as issuers often claim. Additionally, Dudley emphasized the need for strong consumer protection laws to fight fraud and scams, which have undermined investor confidence in the crypto market.

“Strong guardrails” are necessary, Dudley said. Without clear regulations, cryptocurrencies risk remaining unstable and vulnerable to misuse, limiting their benefits to the financial system.

Bitcoin’s role in government reserves demands careful strategy and oversight!

Debashree Patra

Fun-loving and cheerful, a passionate blockchain and crypto writer who knows no boundary…connect if you share the same passion. With 10+ years of writing experience, I am a Crypto Journalist by chance, exploring, and learning all the dynamics of the sci-fi action-filled crypto world. Currently, focusing on cryptocurrency news and price data. With a passion for research and challenging my capabilities, I am slowly getting into the crypto arena to bring new insights every day.

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