US government attacks Bitcoin in new report, promotes a CBDC
US President Joe Biden released the government’s economic report on Monday, in which Bitcoin plays a major role. BTC is mentioned as many as 75 times in the report, which attempts to denigrate Bitcoin and promote a central bank digital currency (CBDC) in the US as the better solution.
In the section titled “The Perceived Appeal of Crypto Assets,” the White House spends many pages describing how Bitcoin works before denying the leading cryptocurrency the function of money by definition. In particular, BTC fails to fulfill two out of three characteristics of money.
“Bitcoin is not money”
First, the report cites that Bitcoin does not fulfill the characteristics of a unit of account because the values of goods and services are not denominated in BTC, but in US dollars, and a conversion is required. Regarding the question of whether Bitcoin can serve as a medium of exchange, the White House writes that BTC “is not as effective a medium of exchange” as the US dollar.
“The strength of the US dollar is derived from several important factors, such as faith in public institutions and the legal system, but cryptocurrencies lack these factors,” the report said. Third, the report also denies BTC the property of a store of value due to its “significant volatility.”
For example, the value of a Bitcoin (relative to the US dollar) increased by over 1,000 percent from March 2019 to March 2021, and then decreased by over 70 percent from November 2021 to October 2022. This volatility means that anyone using Bitcoins to store their savings theirs is exposed to high volatility risk in purchasing power.
For Bitcoiners, the accusations should be more than flimsy given the massive devaluation of the USD against Bitcoin, record high inflation, the US banking crisis, bank bailouts, among others. “What the White House can’t say, of course, is that the value of Bitcoin is to protect you from their abuse of power, monetary or otherwise,” Troy Cross wrote in response to the report.
As one might expect, the White House also attacks Bitcoin mining as an energy-guzzling monster in the report. The report cites a 2022 University of Cambridge study that claims Bitcoin mining consumed more energy in 2021 than several entire countries, including Finland, Belgium and Chile. Any difference is avoided, while the report claims additional environmental damage such as noise, air and water pollution.
“Not all crypto mining operations use the same amount of power. […] Despite Ethereum’s switch to proof-of-stake, Bitcoin has not announced plans to make a similar change,” the report continues.
Dennis Porter, founder of SatoshiAct, which advocates the positive effects of BTC mining, wrote disillusionedly that it is becoming clear that the voices of reason on Bitcoin and digital assets have left the White House. – We hope they will return.
White House: “Bitcoin has not announced plans to make a similar change” to proof-of-stake. pic.twitter.com/97sKw6DKWa
— Dennis Porter (@Dennis_Porter_) March 21, 2023
CBDC is the better Bitcoin, according to the White House
In stark contrast, the report says a central bank digital currency (CBDC) represents the opportunity to introduce a digital form of money. “While operating under the supervision of a trusted authority, both of these mechanisms have the potential to realize many of the benefits that cryptoasset developers have promised,” the report said, further explaining:
A potential US CBDC could also help support other policy goals. For example, a potential US CBDC could help ensure that such payment systems are aligned with the principles of human rights, democratic values and privacy.
Dave Birnbaum, director of products at Coinbits has strong word for the report. In a Twitter thread, he writes that the arguments in the report summarize the banking panic of 1907, when private bankers pooled their resources to save the system.
“This is cited as a lesson that the government should have that power instead, so they created the Fed to use it instead of private citizens,” says Birnbaum, who goes on to discuss that the section on cryptocurrencies can be understood as a “micro -aggression, suggesting that those who think digital assets are appealing are party to something akin to a Marxist false consciousness.”
Mike Novogratz, CEO of Galaxy Digital, responded in a chirping:
Maybe they should refund me all the taxes I paid for the last 10 years on my crypto trading. They are wrong! $BTC is a report on the management of the economy. And the rise tells us something.
At press time, the BTC price stood at $28,103, driven by the US banking crisis and renewed monetary stimulus from the Federal Reserve.
Featured image from iStock, chart from TradingView
