Key Takeaways
- Bitcoin criticized by Federal Reserve Bank for lacking intrinsic value and destabilizing fiscal policies.
- Proposed solutions include taxing or banning Bitcoin to restore fiscal control.
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Bitcoin has come under sharp criticism in a new published paper by the Federal Reserve Bank of Minneapolis. The report labels Bitcoin a “useless piece of paper,” emphasizing its lack of intrinsic value and its role as a mere speculative asset.
It also highlights Bitcoin’s disruptive impact on the government’s ability to manage permanent primary deficits.
The Federal Reserve’s critique emphasizes how Bitcoin disrupts traditional fiscal mechanisms, particularly by undermining government strategies for managing continuous primary deficits and destabilizing fiscal equilibrium.
According to the authors, “the presence of these useless pieces of paper, [Bitcoin], introduces a new balanced budget trap.”
The paper suggests that to restore fiscal control, governments should either impose a tax on Bitcoin or outright ban its trade.
“A legal prohibition against Bitcoin can restore unique implementation of permanent primary deficits,” the report states, arguing that allowing Bitcoin to exist destabilizes fiscal policy.
Beyond banning Bitcoin, the paper also explores the potential use of a targeted tax on Bitcoin holdings. The authors propose taxing Bitcoin at a rate proportional to the government’s deficit, which would gradually devalue the asset and eliminate its market.
This harsh critique comes amid ongoing global debates about the role of digital currencies, with the paper fueling discussions on whether such assets should be taxed or even banned.
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