As a seasoned analyst with over two decades of experience in the financial industry, I find the recent paper by the Federal Reserve Bank of Minneapolis suggesting a ban or tax on Bitcoin to maintain primary deficits, intriguing yet questionable.
A new report from the Federal Reserve Bank of Minneapolis proposes that governments could either outlaw or impose taxes on Bitcoin as a means to preserve budget surpluses (primary deficits in negative terms).
A recent publication from the Minneapolis Federal Reserve on October 17th suggests that governments should consider two options regarding Bitcoin (BTC): either enforcing legal restrictions to halt its trading, or implementing a Bitcoin tax in order to sustain ongoing budget deficits.
According to the paper ‘Unique Implementation of Permanent Primary Deficits?’ by Amol Amol and Erzo G.J. Luttmer, a ban on bitcoin or a tax on it at a certain rate could potentially bring about a situation where only one implementation of permanent primary deficits is used.
In a 40-page study, Bitcoin is referred to as a “self-imposed fiscal constraint,” which signifies a situation where a government is compelled to maintain a balanced budget due to the decentralized nature of Bitcoin. This is significant because central banks, particularly those attempting to preserve ongoing deficits through nominal debt, view Bitcoin’s decentralization as an impediment for implementing policy, especially monetary policies.
Researchers have labeled Bitcoin as a type of “fixed-supply financial asset” in the private sector that doesn’t represent any tangible resources. They argue that due to its characteristics, it could potentially cause problems. As a result, they suggest either prohibiting Bitcoin or imposing taxes on it to address this issue.
When a government’s expenditures surpass its tax and revenue income, we call this a persistent or ongoing primary deficit. This implies that the government plans to continually spend more funds than what they have budgeted.
According to Matthew Sigel, who serves as the head of digital asset research at VanEck, he perceives the study published by the Manhattan Federal Reserve as a critical assessment or challenge directed towards Bitcoin.
As Sigel suggests, the research implies that governments can sustain ongoing budget deficits when people fail to recognize and start using alternative currencies such as Bitcoin.
Additionally, he referenced a comment from Bitcoin analyst Tuur Demeester, who took issue with a October 12 research document by the European Central Bank. This paper suggested that established Bitcoin owners benefit at the expense of newer ones and proposed either regulating Bitcoin to curb its value increase or outright banning it altogether.
In a post on October 21st, Sigel mused that ‘Regulatory Restriction’ and additional taxes on Bitcoin could be implemented to maintain government debt as nothing more than ‘Absolutely Safe Financial Assets.’
Read More
Sorry. No data so far.
2024-10-21 11:23