In a scathing criticism of digital assets and cryptocurrencies, the White House stated in its new report that crypto assets are neither an "effective alternative to fiat money" nor do they "make payments more efficient," a common argument that is used by proponents of the same. The report added that instead, such digital assets are creating new issues for consumers as well as the financial ecosystem as a whole. The comments were part of the March 2023 issue of the annual The Economic Report of the President. The report is prepared by the White House Council of Economic Advisers.
The 513-page report contains an entire chapter on the risks of cryptocurrencies. The report usually signals the priorities and the economic policies that the president of the world’s biggest economy is going to be focusing on.
With crypto assets soaring in popularity over the course of COVID-19, the market for cryptocurrencies and digital assets expanded rapidly without legislation being able to catch up in time. However, regulators across the world are now looking to rein in the crypto industry, a fact that has spooked many in the industry. The recent collapse of TerraUSD and Bitconnect, along with the failure of FTX and Signature Bank, only serve to highlight the unregulated risks in the space.
The report argues that despite its many purported benefits, the crypto industry has been unable to deliver on its promises. "It has been argued that crypto assets may 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 that extract value from both the provider and recipient. Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits," the report said.
The report also added that the blazing fall of crypto assets from a peak market cap of over $3 trillion to just under $1 trillion within a period of less than a year serves to highlight the fundamental issues with cryptocurrencies. "It largely reflects the failures of certain prominent crypto asset projects and firms,” the report states.
