White House Sees Little Value In Digital Assets, Criticizes Crypto In New Report

The latest economic report to Congress from the White House criticizes digital assets, claiming they have not lived up to their expected benefits and pose risks to consumers and the U.S. financial system. The report follows President Biden's order to federal agencies to investigate and issue reports on digital assets, a year ago.

The report argues that cryptocurrencies have not acted as distribution tools for intellectual property or financial value, nor improved financial inclusion or payment efficiency. The report further raises concerns about the role of regulation in safeguarding consumers and the financial system from crypto-related panics, crashes, and fraud.

The White House's report to Congress on digital assets suggests a shift from a neutral stance to a potentially adversarial one. The report questions the need for digital assets with the upcoming launch of the Federal Reserve's faster payments network, which could offer significant benefits to consumers and businesses. The report raises concerns about the potential risks associated with central bank digital currencies, such as credit availability and bank runs.

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However, it notes that distributed ledger technology could be useful in the future, citing the New York Fed's pilot program for a wholesale CBDC. The report argues that digital assets are neither a stable store of value nor an effective means of payment, citing the tension between being an investment vehicle and a form of money. Additionally, the report highlights the risks associated with stable coins, noting that holders without redemption rights may struggle to exit their positions.

The White House report criticizes distributed ledger technology, claiming that traditional technology could perform better and that several use cases are flawed. The report notes the prevalence of noncompliance in securities and other financial regulatory laws, scams, and the concentration of activities on crypto trading platforms, which are prohibited at existing exchanges.

The report also criticizes proof-of-work mining for increasing local energy costs and heightening the risk of power crises. Additionally, DeFi applications are criticized for creating serious risks to investors and for performing regulated functions without appropriate regulations. The report concludes by urging regulators to apply economic principles in regulating digital assets. It remains unclear whether these criticisms reflect a majority opinion in the administration.

The full report can be found here: https://www.whitehouse.gov/wp-content/uploads/2023/03/ERP-2023.pdf