Bitcoin Act of 2024 Faces Opposition from Former Fed President Bill Dudley

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Bill Dudley, the former president of the Federal Reserve Bank of New York and current chair of the Bretton Woods Committee, has dismissed the idea of Bitcoin (BTC) becoming a government reserve currency. In a Dec. 6 Bloomberg op-ed, Dudley argued that such a move offers no significant advantages and primarily benefits existing Bitcoin holders, who are strongly advocating for this proposal.

Following the news, the Bitcoin price dropped 4.31% to $ 98,854 after hitting a record high of $104,000. Dudley admitted that Bitcoin has the advantage of transferring money without a middleman, but its instability makes it unsuitable as a national reserve fund.

Criticism of the Bitcoin Act

Dudley’s remarks come in response to the Bitcoin Act of 2024, introduced by Senator Cynthia Lummis. This draft legislation proposes the creation of a strategic Bitcoin reserve and mechanisms to ensure transparency in managing BTC holdings. While some supporters view the bill as a pathway to global Bitcoin adoption, others, including Dudley, see it as a risky initiative.

Dudley warned that adopting this proposal would inflate Bitcoin’s price without any clear benefits to the government or the economy. He expressed concerns over the lack of an exit strategy, cautioning that the U.S. government could end up holding highly volatile assets with no income potential.

Economic Implications

The former Fed chief provided a stark economic perspective on Bitcoin adoption. Dudley calculated that even a minor 2% allocation of global portfolios—valued at around $250 trillion—would require Bitcoin to hit a staggering $250,000 per coin. Increasing this allocation to 4% would double Bitcoin’s price, creating a speculative bubble that could destabilize markets.

A Call for Regulation

Instead of advocating for Bitcoin as a reserve currency, Dudley urged Donald Trump’s administration to focus on regulating the crypto industry. He highlighted the need for laws ensuring that stablecoins are fully backed by treasury bills, as issuers often claim. Dudley also stressed the importance of consumer protection measures to combat fraud and abuse, which continue to erode trust in the crypto market.

Moreover, Dudley knows the potential of cryptocurrency to improve the financial system but emphasizes that “strong guardrails” are essential to prevent misuse. Without robust regulations, he warned, the crypto sector’s benefits will remain out of reach, overshadowed by scams and instability.

Bitcoin’s role in the mainstream US economy remains a debatable topic. Dudley’s opposition underscores the broader challenges of integrating cryptocurrencies into government and institutional frameworks while balancing innovation with economic stability.