Trump Considers Changes to Federal Reserve

• Trump considers removing Fed members nominated by Biden.
• Bitcoin can be included in management's strategic plans.
• Federal Reserve independence is under discussion in Congress.

The Donald Trump administration is already beginning to explore ways to reshape the leadership of the Federal Reserve, although the president-elect has not have The president has the legal authority to directly fire the institution’s current chairman, Jerome Powell. Powell, appointed by Trump in 2017, serves until 2026 and can only be removed for “good cause,” a criterion that covers serious misconduct but not policy disagreements. Trump could still target members of the institution’s board appointed by Joe Biden.

Among the names most talked about is Michael Barr, the Fed's vice chairman for supervision, known for his strict banking regulation. Barr, nominated by Biden, has a term until 2026, but sources indicate that he has already sought legal advice from Arnold Porter to prepare in case the new administration tries to remove him. Barr has been the target of criticism from Republicans and the financial sector, especially due to his stricter regulatory proposals.

Another topic that has drawn attention is the Federal Reserve's stance on cryptocurrencies. Powell has already stated that the institution does not intend to adopt Bitcoin as part of its strategic reserves, in accordance with the restrictions imposed by the Federal Reserve Act. This conservative approach is seen as a contrast to Trump's plans, who has already signaled interest in creating a strategic Bitcoin reserve to strengthen the United States' competitiveness in the digital assets market. Despite the optimism of some sectors, experts warn of the legal and economic challenges involved in such a proposal.

Biden's other appointees, including Adriana Kugler, Philip Jefferson and Lisa Cook, could also face pressure. Kugler, whose reputation has been criticized, has a term until 2026, while Jefferson and Cook were appointed in 2022.

On the other hand, Trump allies at the Fed, such as Christopher Waller and Michelle Bowman, are in more secure positions. Both were appointed during the previous administration and share views more aligned with the former president.

Trump could also consider strategies such as having Congress revise the Federal Reserve Act to limit the central bank’s independence or even demoting Powell from his position as chairman while keeping him on the board. That last option, however, has never been tested in court and raises questions about its legal viability.

The Federal Reserve’s independence is a sensitive issue, with direct implications for global financial markets. Any move to weaken it could generate economic volatility and impact the cryptocurrency market, which has already shown sensitivity to Powell’s statements about the sector.