Bitcoin may face taxation or bans to help address U.S. budget deficits, Fed claims

A research paper from the U.S. Federal Reserve (Fed) Bank of Minneapolis suggests that Bitcoin may need to be taxed or banned to help governments maintain permanent budget deficits, Cointelegraph reported. The Oct. 17 paper argued that Bitcoin creates a "balanced budget trap," forcing governments to balance their budgets. The researchers describe Bitcoin as a fixed-supply private asset without real resource claims, suggesting it should be taxed or banned to support deficit policies. The U.S. national debt has reached $35.7 trillion, with an annual primary deficit of $1.8 trillion, driven by rising interest costs. Investment management firm VanEck’s Head of Digital Assets Research Matthew Sigel said the Minneapolis Fed has joined the European Central Bank (ECB) in targeting Bitcoin, while ECB adviser Jürgen Schaaf also called for curbing Bitcoin in an X post on Oct. 20.