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Former New York Fed Chair Bill Dudley criticized proposals for a U.S. Bitcoin reserve, arguing it risks fueling inflation and worsening government finances. His remarks follow Bitcoin’s dramatic price swings, peaking at $104,000 before dropping to $98,854.
Push for a National Bitcoin Reserve Gains Traction
Some lawmakers and crypto aficionados have been pushing for a national Bitcoin reserve this year, claiming it could diversify U.S. financial assets and protect the country from inflation, U.Today reports.
However, Dudley contends that a Bitcoin reserve may not be useful in the long run, despite his belief in the potential of crypto technology to enhance the financial system and the fact that a Bitcoin reserve would cause BTC values to surge.
Bitcoin was trading at $98,854 as of this writing, down 4.31% in the last 24 hours. During yesterday's trading session, it reached a new all-time high of $104,000.
Inflation Risks and Volatility in Bitcoin Reserves
Former New York Federal Reserve president Bill Dudley argues in an opinion piece for Bloomberg that a Bitcoin reserve could be a bad idea for a number of reasons, including that it could lead to inflation and that the government would be left holding tokens that are highly volatile and don't produce any income.
Bitcoin is not a desirable medium of trade because of its volatility, and it scarcely meets the criteria for money, says Dudley. He pointed out that most countries do not mandate its use as currency. "Transactions are slow and expensive, requiring significant computing power and energy to validate each one," said Dudley.
Bitcoin’s Positive Attributes, According to Dudley
But there are some good things about Bitcoin, according to the former Fed president: "It’s portable—you can keep millions of dollars’ worth on a thumb drive. It’s semi-anonymous, in the sense that holders are identified only by a public alphanumeric key. It can be transferred to anyone, anywhere, without relying on government-regulated banks or other traditional financial intermediaries."
Dudley thinks a Bitcoin reserve, if implemented, would cause inflation to spike because investors would rush to buy BTC before the government buys it, but it would also send the price of Bitcoin soaring.
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