'We're not allowed to own bitcoin,' Fed Chair Powell says in light of Trump's strategic bitcoin reserve promise

U.S. Federal Reserve Jerome Powell said the central bank is not allowed to hold bitcoin and is "not looking for a law change" in the face of a promise made by President-elect Donald Trump to create a strategic bitcoin reserve.

During a  news conference on Wednesday, a journalist from Axios asked Powell whether Powell sees value in the U.S. government building a bitcoin reserve. 

"We're not allowed to own bitcoin," Powell said. "The Federal Reserve Act says what we can own and we're not looking for a law change. That's the kind of thing for Congress to consider, but we are not looking for a law change at the Fed."

In Congress, Sen. Cynthia Lummis, R-Wyo., has a draft bill circulating that would direct the U.S. Treasury to buy one million bitcoin over a period of five years.

Ahead of elections in November, Trump also threw support behind the creation of a strategic bitcoin reserve. During an interview with CNBC, Trump doubled down last week, saying, "we're gonna do something great with crypto, 'cause we don't want China, or anybody else, not just China, others are embracing it, and we want to be the head."

Other states have also introduced bills to invest in bitcoin. Pennsylvania Republican lawmakers introduced a bill in November that would allow Pennsylvania's state treasurer to invest in bitcoin, digital assets and crypto-based exchange-traded products.

The idea of a strategic bitcoin reserve has been met with some criticism . More recently, former Federal Reserve Bank of New York Bill Dudley said it would be a bad dea l for Americans in an opinion article published on Bloomberg last week.

Just before Wednesday's news conference, the central bank said it would cut interest rates by 25 basis points . Bitcoin's value fell by almost 5% after 1 p.m. ET on Wednesday to closer to $100,500, according to The Block's price page . 

"The fact that Bitcoin's price stumbled on Fed Chair Powell's remarks suggest investors may be placing too much emphasis on the theoretical possibility of a strategic Bitcoin reserve," said Zach Pandl, head of research at Grayscale, in an email sent to The Block. "Grayscale Research expects more nation states to adopt Bitcoin, but the next step will more likely be sovereign wealth funds in Asia or the Middle East, which already manage highly diversified pools of assets."