Key takeaways
- Bitcoin criticized by the Federal Reserve Bank for its lack of intrinsic value and destabilizing fiscal policies.
- Proposed solutions include taxing or banning Bitcoin to restore tax control.
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Bitcoin has come under heavy criticism in a new article published by the Federal Reserve Bank of Minneapolis. The report calls Bitcoin a “useless piece of paper,” highlighting its lack of intrinsic value and its role as a mere speculative asset.
It also highlights the disruptive impact of Bitcoin on the government’s ability to manage ongoing primary deficits.
The Federal Reserve’s criticism highlights how Bitcoin disrupts traditional fiscal mechanisms, including undermining government strategies for managing ongoing primary deficits and destabilizing the budget balance.
According to the authors, “the presence of these useless pieces of paper (Bitcoin) introduces a new pitfall to budget balance.”
The paper suggests that to restore fiscal control, governments should either impose a tax on Bitcoin or ban its trading altogether.
“A legal ban against Bitcoin can restore the unique implementation of permanent primary deficits,” the report said, 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.
The harsh criticism comes amid ongoing global debates over the role of digital currencies, with the paper fueling discussions over whether such assets should be taxed or even banned.
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