The Federal Reserve report proposes taxing Bitcoin or implementing a ban to address the government deficit, facing criticism from industry professionals

ChainCatcher News, the Federal Reserve Bank of Minneapolis recently released a new research report expressing concerns about the impact of Bitcoin on government fiscal policy, suggesting that it may need to be taxed or legally prohibited to help the government manage deficits.

The paper argues that Bitcoin complicates efforts to maintain a permanent government deficit, especially in an economy that relies on nominal debt. It points out that Bitcoin creates what is known as a "balanced budget trap," forcing the government to balance its budget.

This paper has faced sharp criticism from Bitcoin supporters. Matthew Sigel, head of digital asset research at VanEck, stated that the Federal Reserve Bank of Minneapolis now aligns with the European Central Bank's (ECB) critical stance on Bitcoin.

He noted that the document envisions implementing legal prohibitions and additional taxes on Bitcoin to ensure that government debt remains the only "risk-free" security.

Dan McArdle, co-founder of Messari, specifically pointed out a paper published by the bank in 1996 titled "Money is Memory," which described money as a fixed supply object that does not enter production, a concept closely related to the design of Bitcoin.