Former Fed Bank president Bill Dudley slams Trump's federal bitcoin reserve proposal in Bloomberg op-ed

President-elect Donald Trump's support behind creating a federal bitcoin reserve is a terrible deal for Americans, according to former president of the Federal Reserve Bank of New York Bill Dudley.

A bitcoin reserve could fuel inflation and wouldn't be of value to the government, Dudley said Friday in an opinion article published on Bloomberg . Dudley was president of the Federal Reserve Bank of New York from 2009 to 2018 and was previously a chief economist at Goldman Sachs.

"What’s in it, though, for the government or for people who don’t hold Bitcoin? Nothing good," Dudley wrote. "There’s no exit strategy, so the purpose must be to push prices higher, not create value for the government — which would be stuck holding volatile tokens that produce no income."

To buy bitcoin, the Treasury Department would have to borrow or the Federal Reserve would need to create money, Dudley added.

Trump said at a July conference that he would create a national bitcoin reserve. Since being elected on Nov. 5, the price of bitcoin has reached new heights, surpassing a record $100,000 on Thursday. Trump is not alone in his endeavors to create a bitcoin reserve — Republican Sen. Cynthia Lummis of Wyoming has a draft bill circulating that would direct the U.S. Treasury to buy one million bitcoin over a period of five years.

Brian Hughes, a Trump-Vance Transition spokesman, pushed back on Dudley's op-ed and said the president-elect would support crypto and other technologies, in an emailed statement to The Block. 

"There has been an effort in the Washington bureaucratic swamp to stifle innovation with more regulation and higher taxes, but President Trump will deliver on his promise to encourage American leadership in crypto and other emerging technologies," Hughes said. 

Lummis has said such a reserve would bolster the "position of the United States dollar in the financial system," according to a copy of the draft version of the bill released in July.

Lummis did not immediately respond to a request for comment.

Instead of creating a bitcoin reserve, Dudley said the incoming Trump administration should work on regulations and laws for the crypto industry.

"Define legislatively whether tokens are currencies or securities, and who regulates them," Dudley said. "Set rules to protect consumers and to prohibit use for criminal activities such as terrorist financing or illicit drug sales."

Work has been underway in Congress to regulate stablecoins and crypto at large. Those bills would have to be reintroduced in the new year.