Global Regulators Intensify Their Efforts against Bitcoin, Researchers Recommend 'Eliminating” the Leading Crypto

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.

Global regulators are ramping up their efforts against Bitcoin, with a paper from the Federal Reserve Bank of Minneapolis and statements from an economist at the European Central Bank (ECB) proposing bold measures to “eliminate” the leading cryptocurrency.

A paper by researchers at the Federal Reserve Bank of Minneapolis suggests that banning Bitcoin or imposing additional taxes on it could help governments sustain their ongoing budget deficits.

The paper, titled “When the Government Spends More Than It Earns: A Balanced Budget Trap,” explores the concept of a “permanent” primary deficit, where governments intentionally continue outspending indefinitely. The researchers argue that Bitcoin poses a “balanced budget trap” by compelling governments to balance their budgets.

“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,” the paper states.

Meanwhile, ECB economist Jürgen Schaaf has raised concerns about the rising price of Bitcoin, arguing that it benefits early adopters disproportionately and could impoverish latecomers or non-holders.

Schaaf explains that even if Bitcoin prices continue to rise without collapsing, the gains in wealth for early investors come at the expense of those who enter later or don’t invest at all. He emphasizes 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.

“The societal impact is real: “missing out” on Bitcoin is different than just a lost opportunity, it means actual impoverishment compared to a world without Bitcoin,” Schaaf notes.

These reports have sparked reactions from the crypto community, with several experts viewing them as an attack on Bitcoin.

Matthew Sigel, Head of Digital Assets Research at VanEck, remarked that the Minneapolis paper reflects an escalated effort to target Bitcoin.

However, Sigel maintained that these proposals do not alter VanEck’s forecast of Bitcoin adoption by central banks in the future. In July, VanEck predicted that Bitcoin could reach a price of $2.9 million by 2050, becoming an integral part of the global financial system.

Bitcoin analyst Tuur Demeester also voiced concerns about the ECB’s paper, warning that the proposals could lead to stricter taxation and regulation of cryptocurrencies.

“In all the years I’ve been monitoring the bitcoin space, this is by far the most aggressive paper to come from authorities. The gloves are off. It’s clear that these central bank economists now see bitcoin as an existential threat, to be attacked with any means possible,” Demeester wrote.

[Editor’s Note: Over 57% of all Bitcoin is held by private individuals, while governments own roughly 2%. Further, any attempt to ban Bitcoin in the past has failed to hinder its growth due to its security design. Even if every Bitcoin miner in the United States were switched off tomorrow due to a ban, it would only lead to a potentially increased block time, which would be fixed with the next difficulty adjustment, and Bitcoin would carry on.]

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