Subnostr

https://www.coindesk.com/policy/2023/02/15/eu-banks-told-by-regulator-to-apply-bitcoin-caps-even-before-they-become-law/

To me, this is a strategy for the EU to prop up their own currency. We may see something similar in the US.

j'ai les clés 2y ago

Think of it this way.

Q: Why do you hold USD?

A: Because it’s legal tender for all debts and, actually, the only monetary instrument accepted by the USG to pay my federal taxes. If I don’t have enough cash on hand, I *have* to liquidate my bitcoin (and other cash equivalents) to pay my tax obligations, annually/quarterly.

In this sense, the domestic demand for dollars is manufactured. If I could pay my taxes in $APPL, I wouldn’t have to first pay taxes in the gains, and then pay my tax bill. But the IRS doesn’t accept $AAPL, or any other asset. Only dollars. But, since sitting in the dollar is a melting ice cube, invest it elsewhere, reducing the demand for dollars temporarily.

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j'ai les clés 2y ago

Q: So, how might governments (i.e. the banking system) maintain demand for their currency?

A: By requiring institutions to hold cash reserves equal to their alternative investments. It forces market participants to maintain a steady demand for their currency. Thus, even if the alternative currency rises in comparison to the fiat, participants must buy more of it, increasing its demand and reducing its supply.

Note that they don’t have the same reserve requirements for domestic bonds, commercial paper or MBS. These already keep demand for domestic fiat inside the economy, keeping it going.

What this means is that this proposed EU rule is a recognition that people are exiting, and they are grasping at ways to keep their currency propped up.

It’s not quite a “then they fight you” stage. It’s more like a “they are shitting their pants” stage.