Deutsche Bank Warns US Tax May Trigger Capital Shift

Deutsche Bank’s warning of the US revenge tax points to significant uncertainties affecting global markets, particularly foreign investments. This could lead to higher demand for alternative assets like cryptocurrencies.

George Saravelos, head of FX research at Deutsche Bank, expressed concerns over the US’s proposed “revenge tax”. Following recent court rulings, the legislation aims to target foreign investors’ passive income, risking a broader capital war.

President Donald Trump’s fiscal package introduces Section 899, potentially affecting foreign investments. Saravelos suggests this shift could impact US Treasury yields, slashing returns by up to 100 basis points, complicating deficit financing.

The potential reduction in Treasury yields could discourage foreign investments, destabilizing US capital markets. This could redirect capital towards alternative financial instruments, including crypto-assets, emphasizing a shift from dollar-denominated assets.

Market analysts note this may complicate deficit financing by discouraging foreign capital, leading to notable consequences. The changes could depress global capital inflows, placing additional pressure on traditional markets.

Historical precedents from similar US policies highlight potential shifts toward non-sovereign assets like Bitcoin. The crypto community anticipates increased advocacy for decentralized assets amid rising policy uncertainties.

Potential outcomes include higher demand for crypto investments, with historical trends suggesting capital outflows from US assets could bolster non-US digital assets. Continued policy uncertainty may highlight the appeal of decentralized platforms.