Federal Reserve suggests stricter regulations or ban on Bitcoin to protect government finances

A recent research paper from the Federal Reserve Bank of Minneapolis, a branch of the US central bank, suggests that governments must tax or ban Bitcoin more heavily to survive. Without these measures, according to this research, it is impossible for governments with large budget deficits to continue working.

Why? Because otherwise people will simply flee to Bitcoin or other forms of scarcity.

Permanent shortages impossible due to Bitcoin?

In fact, the Minneapolis Federal Reserve writes that assets such as Bitcoin have a disciplinary effect on the government. They force the government to limit their shortages, otherwise people will flee to the scarcity of Bitcoin.

After all, who is still interested in buying up government debt when you know that the underlying currency faces a future of inflation?

According to the researchers, Bitcoin introduces a “trap” for the government. They are forced to balance their budgets, otherwise they will encounter problems.

“A legal ban on Bitcoin can restore the unique implementation of permanent deficits, and a tax on Bitcoin can do that too,” the Federal Reserve Bank of Minneapolis said.

Not the first with this message

What is striking is that the Minneapolis Federal Reserve is not the first with this message. The European Central Bank previously came to a similar conclusion.

However, they claim that Bitcoin causes impoverishment among people who do not invest in the digital currency. For that reason they also labeled Bitcoin as a bad development.

The funny thing is of course that they are in principle responsible for the creation of Bitcoin. If central banks had different policies and didn’t cause the inflation we currently see, then Bitcoin would be irrelevant.

In his book The Bitcoin Standard, author Saifedean Ammous indicates that prudent monetary policies of central banks and governments pose the greatest potential threat to Bitcoin. If money had a fair price, if interest rates occurred naturally, then there would be no place for Bitcoin in the financial system.

In fact, Bitcoin was born out of necessity, because we cannot trust governments and central banks to provide a reliable means of savings, a reliable form of money.