Trump doesn’t need Powell and the Fed’s approval to launch a Bitcoin strategic reserve

Last week, Federal Reserve Chairman Jerome Powell wanted everyone to know one thing: the Federal Reserve isn’t touching Bitcoin. Not now, not ever.

During a press conference following the Fed’s monetary policy meeting, Powell made it painfully clear that any plan to stockpile Bitcoin wouldn’t get his support. The result? The crypto market took an immediate nosedive.

Bitcoin’s price, which had been climbing earlier this week, pulled back hard. The odds of a Bitcoin Strategic Reserve (BSR) dropped from 40% to 34% on Polymarket just hours after Powell spoke. Meanwhile, the entire crypto market lost 7.5% of its value, wiping out billions in the blink of an eye.

It’s no surprise traders panicked. But here’s the thing, a recent report on Wu Blockchain has pointed out that Trump doesn’t need the Fed’s approval to start stacking BTC, as we had initially feared.

Trump’s executive workaround

But Trump doesn’t have to care what Powell says. Why? Because as it turns out, Powell actually can’t stop him. If Trump wants a Bitcoin Strategic Reserve, he doesn’t need Powell or the Fed. He can go straight to the U.S. Treasury and make it happen with an executive order.

Here’s how it works: The Treasury Department controls something called the Exchange Stabilization Fund (ESF). This fund was created to stabilize the U.S. dollar and handle financial crises. It holds assets like gold, U.S. dollars, and Special Drawing Rights (SDRs). What it doesn’t hold—yet—is Bitcoin.

Trump could issue an executive order instructing the Treasury to change that. Simple. Unlike most government spending, the ESF doesn’t require Congress to approve its budget. This gives the President and Treasury Secretary an unusual level of control over how the fund is used.

During the COVID-19 pandemic, the Treasury leveraged the ESF to bail out markets, and Congress had to scramble afterward to impose restrictions. If Trump taps into this fund to buy Bitcoin, Congress might investigate, but by then, the purchases could already be underway.

It’s a fast and dirty option, but it’s not bulletproof. Executive orders don’t last forever. Another President could come along, erase Trump’s Bitcoin initiative, and move the ESF money back to safer, more traditional investments. Still, as a short-term strategy, it’s one way to bypass Congress entirely.

A legal path through Congress

Republican Senator Cynthia Lummis has already proposed legislation for this. Her “U.S. Bitcoin Strategic Reserve Act” is currently sitting with the Senate Banking Committee.

Here’s the catch: passing a bill in Congress isn’t easy. Even with Republican majorities, bipartisan support is rare these days. The process could take months, if not years. Both the House and Senate would have to approve the bill before Trump could sign it into law.

Why bother with the legislative route? It offers stability. Unlike an executive order, a law can’t be undone by the next administration with the stroke of a pen. A Congressional mandate would lock Bitcoin into the U.S. financial system as a strategic asset, creating a framework for future reserves.

For Trump, it’s a gamble. The legislative process is slow, and crypto doesn’t exactly have unanimous support on Capitol Hill. But if successful, it would be the strongest endorsement of Bitcoin as part of America’s financial future, just the way he’s been saying he wants it.

What about the Fed?

Some people might wonder if the Federal Reserve could just start buying Bitcoin itself. Theoretically, yes. The Fed conducts open market operations all the time, buying and selling assets like government bonds to stabilize the economy. But Powell’s comments suggest this won’t happen anytime soon.

“The Fed is not the place for Bitcoin,” Powell said. That’s a pretty definitive no. Even if the Fed wanted to purchase Bitcoin, it would need a new policy framework and likely some changes to existing laws. Powell has made it clear he’s not interested in pushing for either.

This leaves the Treasury as the only real option for a government-led Bitcoin reserve. And while Powell might not like the idea, he can’t stop the Treasury from acting independently.

The Trump factor

Trump appointed Powell as Fed Chair in 2018, but their relationship soured almost immediately. The president spent much of his first term bashing Powell for raising interest rates, even threatening to fire him over and over.

Fast-forward to 2024, and nothing has changed. Trump still views Powell as an obstacle, and he very much wants his job.

Interestingly, the president’s family crypto project, World Liberty, wasted no time reacting to Powell’s speech. On-chain data shows the project started buying altcoins just two minutes after the press conference began. All of them almost immediately saw losses, but we don’t think Trump is bothered.

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