On Monday, US President Joe Biden published his administration’s economic report and addressed the topic of cryptocurrencies. The section titled “The Perceived Appeal of Crypto Assets” describes the currencies as “mostly speculative investment instruments” that are “unbacked” and “trade without fundamental anchors.” The White House insists that cryptoassets do not live up to their promises and do not “perform all the functions of money as effectively as sovereign money, such as the US dollar.”
Crypto Assets and Defi Featured in Biden Administration’s Economic Report
The recently published “Economic Report of the President” covers various topics, including the war in Ukraine, Covid-19, infrastructure and US employment statistics. On page 239, the report delves into bitcoin and other cryptoassets, examining claims made by proponents and attempting to refute them. The Biden administration sees crypto assets as too volatile compared to traditional assets. According to the White House, cryptoassets are “mostly speculative investment vehicles” and fail to serve as effective units of account.
The report argues that cryptocurrencies do not work well as a medium of exchange due to their limited acceptance and high volatility, which prevents them from being reliable stores of value. The White House also believes that there is a conflict of interest when crypto assets are seen as both a form of money and an investment vehicle. “In summary, in addition to being speculative assets, cryptocurrencies are currently inefficient alternatives to sovereign money, such as the US dollar,” the report’s authors argue.
The White House points out that cryptoassets do not fulfill fundamental monetary promises and warns that stablecoins may pose a risk. The report highlights the Terra stablecoin implosion as an example, and the White House emphasizes that stablecoins can potentially “disrupt financial stability.” Therefore, “stablecoins are currently too risky to satisfy this need,” according to the president’s economic report. While the White House acknowledges that distributed ledger technology (DLT) is a significant achievement in computer science, it also notes that “there have been limited economic benefits” to DLT.
The Biden administration insists that Defi platforms “should operate in accordance with existing regulations and rules”
The authors of the report also criticize Web3, referring to it as the “so-called new Internet” and rejecting the benefits that its proponents claim. The White House authors conclude that cryptoassets do not offer investments of any fundamental value and cannot serve as an effective alternative to fiat money. Instead, the innovation behind cryptoassets is mostly focused on creating artificial scarcity to support their prices. According to the White House, many crypto assets have no fundamental value. The Biden administration is wary of financial innovation and sees inherent risks. The report emphasizes, for example, decentralized economy (defi) and the wide range of defi protocols.
“The basic promise behind defi is to replace financial intermediaries, instead connecting savers directly with borrowers (or buyers with sellers), allowing them to save on the spread that traditional intermediaries take to make the match with software,” the authors explain. “However, they also create serious risks for investors and cause at least two risks to the wider financial system: the use of significant influence and the performance of regulated functions without compliance with appropriate regulations. Defi platforms that act as unregulated banks, broker-dealers, exchanges and other entities subject to regulation, should operate in accordance with existing regulations and rules.”
Overall, the Biden administration is skeptical of the value and potential of cryptoassets and defi due to concerns over their volatility, limited acceptance and regulatory compliance. White House researchers suggest that regulation of cryptoassets is the best approach to this new technology, whether it lasts or not. Biden’s Council of Financial Advisers criticizes the “illegal financial risks”, pointing out that bad actors can exploit digital assets to cause disruption in financial markets. Since the White House report was published, it has become a hot topic of conversation for crypto supporters on social media and forums.
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artificial scarcity, bad actors, Biden administration, Bitcoin, compliance, cryptoassets, decentralized finance, DeFi, digital assets, digital currencies, distributed ledger technology, economic report of the president, financial innovation, financial intermediaries, financial markets, financial regulations, financial stability, financial system , Illegal Finance Risks , Investors , Joe Biden , Regulations , Regulatory Compliance , Risk Management , Software , Sovereign Money , Stablecoins , Technology , US Dollar , Web3 , The White House
What do you think of the Biden administration’s economic report and skepticism about these new technologies? Share your thoughts on this topic in the comments section below.
Jamie Redman
Jamie Redman is the news editor at Bitcoin.com News and a financial technology journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.
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