White House sues crypto in 2023 economic report

The White House makes a case against crypto assets in its 2023 economic report. The paper states that cryptocurrency assets are primarily speculative investment vehicles, casting doubt on the perceived benefits of cryptocurrencies.

The President’s Economic Report notes: “Cryptoassets to date do not appear to offer investments of any fundamental value, nor do they serve as an effective alternative to fiat money.”

Doubt the benefits of crypto

The report emphasizes that in the US, crypto is not as effective a medium of exchange as the US dollar.

It added, “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 government paper also lists risk and volatility as further disadvantages of cryptocurrencies. In addition, it identifies “run risk” as a major problem with stablecoins. The risk problem comes from multiple redemption requests from depositors in both traditional and crypto markets.

The financial report noted: “An important distinction between stablecoins and bank deposits is that in the United States, bank deposits are subject to an extensive set of regulatory and supervisory requirements.”

However, the demise of Silicon Valley Bank was a crisis flow into the conventional banking industry after the bankruptcies of the crypto sector. The crisis has been referred to as the “Lehman moment” for the technology sector by Cliff Marriott, co-head of technology, media and telecoms for Goldman Sachs in Europe.

The banking sector comes to terms with SVB autumn

BeInCrypto recently analyzed several fundamental issues in the banking sector. In addition to the centralization of strong banking institutions, the absence of public transparency is another area for improvement.

Especially given that innovation is often stifled in traditional settings when cryptocurrencies offer methods to revolutionize finance.

However, the financial report takes a conflicting view.

It stated,

“While the crypto-asset ecosystem and its underlying technology introduce the potential for newfound efficiencies, attempts to challenge fundamental economic principles have often resulted in economic disaster.”

According to the March 2023 report, DeFi applications claim to increase credit availability by lowering intermediary costs. But according to the US government, it poses significant risks to investors and the larger financial system. This is because these platforms often allow users to trade and exchange with high leverage. They may also allow users to perform regulated tasks without complying with the regulations.

US senators recently discussed the risks of “sham audits” regarding cryptocurrency in a letter to the Public Company Accounting Oversight Board. Sens. Elizabeth Warren and Ron Wyden reiterated the risks posed by “proof of reserve” agreements made by outside firms on behalf of auditors in a letter dated March 21.

The senators reviewed how the use of digital assets poses special audit risks for businesses. They added that it requires an adequate risk assessment and audit response by audit firms, taking into account the views of board chair Erica Y. Williams.

The US is exploring the possibility of introducing a CBDC to combat crypto

To mitigate some of the risks associated with the private cryptocurrency industry, the financial report also touches on the prospect of introducing a digital central bank currency (CBDC).

It highlighted that a CBDC operates “under the supervision of a trusted authority.”

Last week, the US Federal Reserve announced that its FedNow service would debut in July. The statement by the Apex Bank regarding instant payment options sparked a discussion about a CBDC lawsuit.

The economic study acknowledges that a CBDC could achieve the government’s policy goals, but also identifies some risks. The report warned: “Like one-to-one backed stablecoins, CBDCs may also pose credit availability risks.”