White House Report Casts Doubt on Cryptocurrencies
The White House's recently released Economic Report of the President includes a chapter questioning the benefits of cryptocurrencies. This is the first time the White House has included a section on digital assets since it began issuing the annual economic policy report in 1950. The report includes 35 pages dedicated to debunking the "Perceived Appeal of Crypto Assets," along with a short section on the FedNow payment system and central bank digital currencies.
The report argues that crypto assets fail to deliver on their touted benefits, such as improving payment systems, financial inclusion, and creating mechanisms to transfer value and intellectual property. It also argues that cryptocurrencies fail to perform the functions of sovereign money, as their prices fluctuate too wildly to be a stable store of value, nor can they function as a unit of account or medium of exchange. Stablecoins are also criticized, as they are subject to run risks and are therefore too risky to satisfy their role as a "fast payment" instrument.
Crypto executives have expressed frustration over the report, with the co-founder of digital asset investment firm Paradigm, Fred Ehrsam, remarking that 15% of the Economic Report was dedicated to "crypto FUD." Kristin Smith, CEO of the Blockchain Association, called the report "disappointing," stating that it shows some in the government appear "increasingly allergic" to the burgeoning crypto industry.
The report also takes aim at decentralization, arguing that blockchain-based applications are in practice neither decentralized nor trustless. Users access crypto assets by going to a limited set of crypto asset platforms, while a small group of miners performs the majority of mining in most crypto assets, it argues.
The latest annual economic policy report was published shortly after the collapses of Silvergate, Silicon Valley, and Signature banks, all of which had served aspects of the crypto industry. Dan Reecer, chief growth officer at decentralized finance platform Acala Network, claims that the report comes "just days" after Operation Chokepoint 2.0 was executed on crypto-friendly banks. He also noted an "obvious early warning" of an upcoming United States central bank digital currency, referencing a section of the report that seemingly touts the benefits of a U.S. central bank-controlled currency.
Despite the criticism, it is worth noting that the report is not a policy statement, and it remains to be seen how the Biden administration will approach the regulation of cryptocurrencies and digital assets in the coming months.