The White House’s annual economic report to Congress says that crypto assets have delivered none of their promised benefits and cannot act as an alternative to fiat currencies.
The White House 513-page report, titled “Economic Report of the President,” underlines the negative aspects of crypto assets to conclude that they do not have any fundamental value and pose risks to consumers and the broader financial system.
The White House’s annual economic report to Congress casts sweeping doubts on the merits of crypto assets, including that crypto assets are neither effective stores of value nor effective means of payment; their innovations are primarily about creating https://t.co/1U25lB0EZD… pic.twitter.com/7Mi3rt96IX
— Wu Blockchain (@WuBlockchain) March 22, 2023
The White House Slams Crypto
The report defines crypto assets as a “subset of digital assets that use cryptographic techniques and distributed ledger technology.” It highlights the arguments made by crypto proponents who say that this asset class may provide other benefits besides decentralized custody and control of money.
They include improved payment systems, financial inclusion, hedge against inflation, and the creation of mechanisms for the distribution of intellectual property and financial value that bypass intermediaries.
But the report pours cold water on crypto by saying, “so far, crypto assets have brought none of these benefits.” The report reads:
“Indeed, crypto assets to date do not appear to offer investments with any fundamental value, nor do they act as an effective alternative to fiat money, improve financial inclusion, or make payments more efficient; instead, their innovation has been mostly about creating artificial scarcity in order to support crypto assets’ prices—and many of them have no fundamental value.”
The White House slams crypto by labeling the asset class as a “speculative investment vehicle,” citing its volatility. According to the report, crypto prices are driven by speculative demand or market sentiment, not by claims on cash flow.
It denies the crypto’s hedge against inflation capability “as inflation increased globally in the second half of 2021 and 2022, the prices of crypto assets collapsed, proving them to be, at best, an ineffective inflation hedge.”
The author added that cryptocurrencies generally do not perform all the functions of money as effectively as sovereign money, restricting their ability to act as an effective alternative to fiat.
Furthermore, the White House also cast doubt over stablecoins’ ability to become fast payment instruments as they are the subject of “run risk.” They also slammed decentralized finance (DeFi) for its inherent run risks and other issues related to hacks.
It says there have been limited benefits from DLT technology, and its promised new internet, so-called web 3, will be the worst of both centralized and decentralized worlds. The report concludes:
“They are largely speculative investment vehicles and are not an effective alternative to fiat currency. Also, they are too risky at present to function as payment instruments or to expand financial inclusion. Even so, it is possible that their underlying technology may still find productive uses in the future as companies and governments continue to experiment with DLT. In the meantime, some crypto assets appear to be here to stay, and they continue to cause risks for financial markets, investors, and consumers.”
The bottom line is that the White House spared no words to prove crypto an all-out danger for the financial system. The community expressed outrage over the report that may shape the policy for a blanket ban on crypto in the US.
Fred Ehersam, the co-founder of investment firm Paradigm, said:
“15% of the annual White House Economic Report is devoted to crypto FUD.”
— Fred Ehrsam (@FEhrsam) March 21, 2023