Bitcoin slides after Treasury Secretary states government cannot direct banks to buy crypto
By isabelle // 2026-02-05
Copy
 
  • Treasury Secretary Scott Bessent firmly rejected any possibility of a federal bitcoin bailout.
  • He clarified the government lacks authority to direct banks to buy bitcoin or use taxpayer funds for crypto.
  • The U.S. government's bitcoin holdings come solely from law enforcement seizures, not investments.
  • An executive order mandates seized bitcoin be held in a Strategic Bitcoin Reserve, not sold.
  • Bitcoin's price fell as markets absorbed the clear message of no federal support.
The specter of government bailouts, a bitter pill from the 2008 financial crisis, was invoked this week in a congressional hearing with a modern twist. The question was not about banks or automakers, but about bitcoin. And the answer from the nation’s top financial official was a definitive and legally constrained no. Treasury Secretary Scott Bessent testified before the House Financial Services Committee on Wednesday, presenting the Financial Stability Oversight Council’s annual report. The hearing quickly turned to the digital asset sector, an area of growing scrutiny under the current administration. In a pointed exchange, Representative Brad Sherman referenced past bailouts and pressed Bessent on whether the federal government could ever step in to rescue bitcoin. Sherman asked whether the Treasury or financial regulators could take action to support crypto, such as by directing banks to buy bitcoin or changing the banking rules in a way that would encourage crypto holdings. Bessent rejected the premise outright. “I am Secretary of the Treasury. I do not have the authority to do that,” he stated. He added that neither his role nor his position as chair of the Financial Stability Oversight Council provides the power to order banks to invest in bitcoin or to allocate public funds into crypto assets.

No taxpayer exposure

Sherman attempted to clarify if taxpayer money under Treasury management could ever be deployed into bitcoin. Bessent emphasized that the government’s current bitcoin exposure comes only through law enforcement seizures, not from any investment decisions. “We are retaining seized bitcoin,” Bessent said. “That is an asset of the U.S.” He elaborated on that point, noting that retained bitcoin from past seizures has appreciated significantly. Bessent cited an example in which roughly $500 million in retained bitcoin later grew to more than $15 billion in value. This underscores the substantial, if unintended, financial upside the government has realized from these forfeited assets, even as policymakers firmly reject the idea of direct market intervention. The testimony provided the latest clarity on the administration’s Strategic Bitcoin Reserve, established by an executive order in March 2025. That order mandates that forfeited bitcoin be held in the reserve rather than sold. Bessent confirmed this policy, stating that once legal matters are resolved, seized bitcoin will be retained by the federal government.

Market reacts to regulatory clarity

The secretary’s unambiguous remarks resonated through financial markets. Bitcoin’s price briefly dipped below $70,000 per token on Thursday, continuing a slide that began following the hearing. The decline reflected a market coming to terms with the clear limits of potential federal support. Analysts noted the selling pressure was part of a broader fragility in digital asset markets, with traders focused on unwinding positions rather than anticipating a government-backed recovery. This stance aligns with Bessent’s earlier comments framing digital asset policy around innovation and regulation, not market manipulation. Speaking at the World Economic Forum in Davos earlier this year, he framed the strategic reserve move as part of a push to bring digital-asset innovation back to the U.S. The approach is one of establishing regulatory leadership and harnessing existing assets, not creating new taxpayer liabilities. The executive order governing the reserve also stipulates that the U.S. can only acquire more bitcoin through asset forfeiture or budget-neutral strategies, such as converting other existing reserve assets. This rules out open-market purchases by the Treasury, a scenario some in the crypto community had speculated about. The government’s role, as defined, is that of a holder of seized property, not an active investor. For critics of digital currencies, Bessent’s testimony offered reassurance that public funds would not be risked. For proponents, it provided a sobering reminder that bitcoin’s market will remain subject to organic supply and demand, without a federal backstop. The historical parallel is clear. Just as the government once decided which traditional institutions were “too big to fail,” it is now drawing a bright line around what it will not support. The hearing concluded with the chair cutting off Representative Sherman after his allotted time expired, leaving the secretary’s final word on the record. That record now shows a federal government content to hold bitcoin it seizes, watching its value fluctuate, but utterly unwilling to use its authority or the public’s money to catch it if it falls. In an era of rapid financial evolution, that distinction between holding an asset and backing it may become one of the most crucial boundaries of all. Sources for this article include: BitcoinMagazine.com Finance.Yahoo.com TradingView.com Benzinga.com
Copy