The White House blasts crypto in its recent economic report – Cryptopolitan
In a new report, the White House takes aim at crypto, arguing that many aspects of the digital asset ecosystem pose problems for consumers, the financial system and the environment.
The Economic Report of the President, released on Monday, is a publication released annually by the Council of Economic Advisers to explain the president’s economic priorities and policies. For example, in the March 2023 issue, an entire chapter was devoted to digital assets and “economic principles.”
White House Economic Report Blasts Crypto – Here’s Why
The first mention of digital assets in the 2023 Economic Report of the President, released alongside the Council of Economic Advisers’ annual update, says that “blockchain technology has fueled the emergence of financially innovative digital assets that have proven highly volatile and subject to fraud.”
Although proponents often claim that digital assets, especially cryptoassets, are a revolutionary innovation, the design of these assets often reflects an ignorance of basic economic principles that have been taught in economics and finance over centuries. This inadequate design is often detrimental to consumers and investors.
Economic Report of the President
The comprehensive report, which includes more than 100 pages of appendices, addresses all aspects of the US economy, including the rise of women in the workforce, climate change, imported goods, foreign investment and education. Nevertheless, many sections discuss technology and digital markets.
Chapter 7 is titled “Competition in the Digital Economy: New Technology, Old Economy.” And Chapter 8 takes crypto head-on under the heading “Digital Assets: Relearning Economic Principles.”
What is the bottom line? First, Crypto advocates should go back to school because they are “re-learning the lessons of past financial crises the hard way.” Meanwhile, crypto costs have hurt consumers, the financial system, and even the physical environment.
In addition to the decentralized custody and control of money, it has been argued that cryptoassets can provide other benefits, such as improving payment systems, increasing financial inclusion, and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries. But so far, crypto assets have not provided any of these benefits.
Economic Report of the President
The authors then discuss a number of “claims” made by crypto supporters, such as the belief that crypto-assets can be investment vehicles, can act as money without a central authority, enable fast digital payments and increase financial inclusion and reduce the number of unbanked and underbanked.
The ensuing long list of counterarguments focuses on potential harm to consumers and the absence of regulation and enforcement.
Regulators change tone
The report comes amid growing industry concerns that federal regulators plan to de-bank crypto companies, despite state and federal regulators denying those claims. Nevertheless, the tone of the report is unlikely to alleviate these concerns.
The criticism in the report to Congress may indicate a shift from an agnostic to an openly antagonistic attitude towards digital assets.
The White House suggests the Fed’s soon-to-launch faster payments network could eliminate much of the argument for digital assets, saying continued investment in the nation’s financial infrastructure has the potential to offer significant benefits to consumers and businesses.
The report casts doubt on, but does not rule out, the possibility of a digital currency issued by the US central bank, saying that CBDCs could hinder credit availability and increase the risk of bank runs.
Crypto executives have expressed displeasure with the latest economic report from the White House, which includes an entire chapter dedicated to questioning the value of digital assets. Fred Ehrsam, co-founder of digital asset investment firm Paradigm, noted that 15% of the financial report was devoted to “crypto R&D.”
According to Dan Reecer, head of growth for decentralized finance platform Acala Network, the report was published “just days” after Operation Chokepoint 2.0 was carried out against crypto-friendly banks.
Referring to a section of the report that appears to extol the virtues of a US central bank-controlled currency, he noted an “obvious early warning” of an impending US CBDC, or digital dollar.
The White House appears to be skeptical of distributed ledger technology in general, citing arguments that existing technology can perform similar functions better and pointing out flaws in a number of specific use cases.
It also highlights the frequent non-compliance with securities and other financial regulatory laws, the large number of frauds and the unusual concentration of activities by crypto trading platforms that would be prohibited on an existing exchange.
The White House also criticizes proof-of-work mining, arguing that it “has few, if any, attendant benefits” to the communities where miners set up shop while raising local energy costs and increasing the risk of power outages.
