Former chairman of the New York Federal Reserve Bill Dudley on Friday voiced strong concerns over the United States potentially including Bitcoin (CRYPTO: BTC) in its national reserves, a proposal gaining momentum among crypto-friendly legislators.
In an opinion piece, Dudley argues that such a move could harm the interests of the general public and compromise the dollar’s standing as the global reserve currency.
He highlighted the potential downsides of establishing a government Bitcoin reserve, stating, “If the United States adopts Bitcoin as a reserve asset, it would likely benefit specific interest groups at the expense of the majority.”
He also warned that such a strategy would be more about inflating Bitcoin’s value than delivering any tangible benefit to the government or citizens.
Bitcoin, which recently surged past $100,000 following Donald Trump‘s election victory, is seen by some as a revolutionary asset.
Proponents believe it could serve as a hedge against inflation and a diversification tool in portfolios.
However, Dudley criticized its role as money, describing its volatility and lack of income generation as fundamental flaws.
“Bitcoin is not connected to any cash flows like interest or dividends, and its price is driven purely by speculative demand,” he explained.
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Dudley pointed out the dangers of the U.S. government holding a volatile asset like Bitcoin and said if the Treasury borrows to fund Bitcoin purchases, it would drive up debt service costs.
“Alternatively, if the Federal Reserve creates money for the same purpose, it risks fueling inflation,” he said, adding that these outcomes would negatively impact taxpayers and the broader economy.
The former Fed chair also noted that the absence of an exit strategy for a Bitcoin reserve would make it a liability. “The government would end up holding tokens that produce no income, offering no real value to the majority of Americans,” he said.
Instead of focusing on Bitcoin as a reserve asset, Dudley called for the Trump administration to prioritize creating a robust regulatory framework for the crypto industry.
He emphasized the need for clear rules to protect consumers, regulate stablecoins, and prevent the use of cryptocurrencies in criminal activities.
“Crypto technology has the potential to improve the financial system,” Dudley said. “However, without strong guardrails, fraud and abuse will continue to undermine trust and hinder progress.”
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