Global authorities have upped their efforts against Bitcoin, with Federal Reserve Bank of Minneapolis researchers and ECB economists recommending “eliminate” the main crypto.
The Federal Reserve Bank of Minneapolis published a report claiming that banning and taxing Bitcoin might help countries maintain budget deficits.
Government expenditure exceeds receipts, excluding debt interest, to create a primary deficit. The article stressed a “permanent” primary deficit, when governments willfully overspend forever.
The academics called Bitcoin a “balanced budget trap” that forces governments to balance their budgets. Bitcoin's decentralization hinders fiscal policy, especially for governments employing nominal debt to sustain deficits. Bitcoin is an alternative financial asset with a fixed supply and direct links to natural resources, challenging fiscal plans.
ECB economist Jürgen Schaaf worried that Bitcoin's growing price favors early adopters. He cautioned that latecomers or non-holders might suffer economic setbacks.
Schaaf highlighted that even if Bitcoin prices climb without crashing, early investors acquire riches at the cost of later or no investors.
He stressed that Bitcoin does not boost economic productivity. As early adopters become wealthy, they may spend more, reducing others' consumption power.
Schaaf advised non-holders to realize that wealth redistribution drives Bitcoin's development at their cost. He urged measures to limit or prevent BTC's growth, saying that pro-Bitcoin politicians might distort income distribution and jeopardize social stability.
The Minneapolis document indicates a renewed push to attack Bitcoin, according to VanEck Head of Digital Assets Research Matthew Sigel.
Sigel said these recommendations do not change VanEck's prediction of central bank Bitcoin acceptance. VanEck forecasted in July that Bitcoin might reach $2.9 million by 2050, becoming part of the global financial system.
Bitcoin expert Tuur Demeester warned that the ECB's study might tighten cryptocurrency taxes and regulation.
