Global regulators are stepping up their efforts to crack down on Bitcoin, with researchers from the Federal Reserve Bank of Minneapolis and economists at the European Central Bank (ECB) suggesting bold measures to “eliminate” the leading cryptocurrency.
The Federal Reserve Bank of Minneapolis released a paper on October 17 proposing a Bitcoin ban and additional taxes to help governments deal with ongoing budget deficits. The researchers highlighted the concept of a “permanent” primary deficit, where governments continue to outspend indefinitely. They argued that Bitcoin’s decentralized nature poses a challenge to traditional fiscal policies and suggested banning Bitcoin or imposing taxes to address this issue.
On October 20, ECB economist Jürgen Schaaf raised concerns about the rising price of Bitcoin, warning that early adopters benefit disproportionately at the expense of latecomers or non-holders. He emphasized that Bitcoin does not increase the economy’s productive capacity and could lead to wealth redistribution that impacts societal stability. Schaaf called for policies to curb Bitcoin’s expansion or potentially eliminate it to address wealth distribution issues.
These recommendations have sparked reactions from the crypto community, with experts viewing them as an attack on Bitcoin. Matthew Sigel from VanEck noted that the proposals reflect a heightened effort to target Bitcoin but maintained that they do not change the forecast for Bitcoin adoption by central banks. Bitcoin analyst Tuur Demeester also expressed concerns about the ECB’s paper, warning of potential taxation and regulation of cryptocurrencies.
Despite the regulatory pressure, over 57% of all Bitcoin is held by private individuals, indicating strong grassroots support for the cryptocurrency. Previous attempts to ban Bitcoin have failed to hinder its growth due to its secure design. Even if all Bitcoin miners in the US were shut down, the network would adjust and continue to operate.
These discussions around eliminating Bitcoin underscore the challenges faced by the fiat system and highlight the disruptive potential of cryptocurrencies. As regulators grapple with how to address the rise of digital assets, the debate over Bitcoin’s future intensifies, raising important questions about financial policy, wealth distribution, and societal impact in the digital age.