With US national debt soaring past $34 trillion, and with the price of bitcoin and other cryptocurrencies nearing record highs and showing signs of even more rapid price growth as a result of statements by former president Donald Trump and massive fiscal stimulus due to the Covid-19 pandemic, Wall Street is paying close attention too. JPMorgan has predicted that the price of bitcoin could surge to nearly $146,000. So have the Federal Reserve and the European Central Bank (ECB), which have responded with their own papers that warn the ability of the state to design fiscal policy to meet the needs of the public will become threatened by an accelerating destabilisation that can be contributed to by bitcoin and other similar cryptocurrencies.
In a paper discussing the financial risks of bitcoin, the ECB and the Federal Reserve have implied that if economic imbalances are to be avoided then either bitcoin should be heavily controlled or taxed. The authors of the ECB paper seem to leant towards the latter, stating that bitcoin is basically a ‘zero-sum game’ that hurts adopters that come late to the game. As a result, discussions on whether high taxes or a total ban on cryptocurrencies could be around the corner have been rife. The world’s nations have been suggesting that they should tax cryptocurrencies more and more lately. This is just the latest phase of a bigger clash, one that is increasingly being framed in ideological and economic terms. Traditional financial institutions and the burgeoning interest in cryptocurrencies represent two distinct worlds with significant ideological and economic tensions as governments weigh possible options for legalising digital currencies.
Source: Forbes
