Global regulators have intensified their efforts against Bitcoin, with researchers from the Federal Reserve Bank of Minneapolis and economists at the European Central Bank (ECB) making bold recommendations to “eliminate” the leading crypto.
Feds proposes Bitcoin ban
On Oct. 17, researchers from the Federal Reserve Bank of Minneapolis released a paper suggesting that banning Bitcoin and imposing additional taxes on it could help governments sustain their ongoing budget deficits.
A primary deficit occurs when government spending exceeds revenue, excluding interest payments on existing debt. The paper emphasized the concept of a “permanent” primary deficit, where governments intentionally continue outspending indefinitely.
The researchers argued that Bitcoin poses a “balanced budget trap” by compelling governments to balance their budgets. Bitcoin’s decentralized nature is seen as a hurdle to fiscal policy, particularly for governments looking to maintain permanent deficits using nominal debt. With its fixed supply and direct ties to natural resources, Bitcoin challenges traditional fiscal strategies by providing an alternative financial asset.
Deemed a “solution,” the paper suggests either banning Bitcoin or introducing taxes to alleviate this issue, stating:
“A legal prohibition of bitcoin or a tax on bitcoin are forms of financial repression that may be useful when the ability of the government to use consumption taxes is limited.”
ECB economist warns of Bitcoin’s societal impact
On Oct. 20, ECB economist Jürgen Schaaf raised concerns about the rising price of Bitcoin, arguing that it disproportionately benefits early adopters. He warned that latecomers or non-holders could face significant economic disadvantages as a result.
[Editor’s Note: In the fiat system, the top 1% own more wealth than the bottom 95% of the world’s population put together]
Schaaf explained that even if Bitcoin prices continue to rise without collapsing, the wealth gains for early investors come at the expense of those who enter later or don’t invest at all.
He emphasized that Bitcoin does not increase the economy’s productive capacity. As early adopters gain wealth, they are likely to consume more, which could ultimately reduce the consumption power of others.
In a scenario where Bitcoin prices keep rising, Schaaf noted that this shift in wealth could have lasting effects, with early adopters enjoying luxury consumption while latecomers face financial…
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