Minneapolis Fed release paper pushing for Bitcoin ban or tax to maintain deficits

The Federal Reserve Bank of Minneapolis recently published an article suggesting that governments should ban or tax Bitcoin to maintain primary deficits.

A working paper recently published by the Minneapolis Fed on October 17 calls on governments to either legally ban Bitcoin (BTC) trading or enact a Bitcoin tax if they want to maintain permanent primary deficits.

“Unique Application of Persistent Primary Vulnerabilities?” “A legal ban on Bitcoin could restore unprecedented enforcement of permanent primary deficits, and so could a tax on Bitcoin,” reads the abstract of the study report. By Amol Amol and Erzo GJ Luttmer.

The 40-page article labels Bitcoin a “balanced budget trap,” defined as an alternative situation in which the government is forced to balance its budget. This is because the Fed sees Bitcoin’s decentralization as an impediment to implementing policy, especially for governments aiming to maintain persistent deficits using nominal debt.

Researchers described Bitcoin as an example of a fixed-supply “private sector security” with no “real resource demands.” Therefore, they argue that Bitcoin should be banned or taxed to solve this problem.

A primary deficit occurs when a government spends more money than it receives in taxes and other revenues. Adding the term “permanent” to the primary deficit indicates that the government intends to continue spending more money than is in the budget.

Matthew Sigel, VanEck’s head of digital asset research, sees the working paper published at the Manhattan Fed as an “attack on Bitcoin.”

According to Sigel, the article shows that governments could run permanent deficits if consumers “fail to recognize and embrace new money like BTC.”

He also quoted a post by Bitcoin analyst Tuur Demeester criticizing the European Central Bank’s Oct. 12 research paper that claimed old Bitcoin holders were profiting from new owners. The article argued that Bitcoin should be regulated to prevent its price from rising or being banned altogether.

“[The paper] In an October 21