The White House report published Monday portrays crypto in the worst light possible, arguing that digital assets failed to deliver their promises but still pose real risks to consumers and banking industry. The publication was received by the crypto community as confirmation of their long-held suspicion that the Biden administration is seeking to choke crypto off from the U.S. financial system.
For context, the Economic Report of the President is an annual publication written by the Chairman of the Council of Economic Advisers that aims to provide a comprehensive overview of the nation’s economic progress and current trends in employment, production, real income, and federal budget. This year’s report marks the first time the White House discussed digital assets in publication — and, as one could expect, it wasn’t the pat on the back.
The entire chapter of the March 2023 report, or 15% of its massive 513-page volume, was dedicated to bashing crypto as a speculative asset that would never replace the good old fiat — although its underlying technology can be used to create a nice CBDC that, in regulators’ view, won’t crash the financial system and pollute the planet.
“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 president’s report reads. “This raises the question of the role of regulation in protecting consumers, investors, and the rest of the financial system from panics, crashes, and fraud related to crypto assets.”
According to the authors of the report, cryptocurrencies failed to deliver their advertised promises of decentralization and serving as reliable payment tools for unbanked and underbanked individuals.
"In addition to the decentralized custody and control of money, 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," the report states. "So far, crypto assets have brought none of these benefits."
The report comes amid the banking crisis triggered by the stunning one-week collapses of three US banks, Silvergate Bank, Silicon Valley Bank, and Signature Bank. Since all three institutions were crypto-friendly, their swift demise raised suspicions of government interference to cut off crypto from the US banking system. This coordinated crackdown on the emerging industry is being referred to as 'Operation Choke Point 2.0,’ a strategy first described by venture capitalist and crypto advocate Nic Carter.
Although the report acknowledged the value of the underlying blockchain and DLT technology, the government seems to eye this tech for its own needs, namely for the launch of the digital dollar and FedNow instant payments system.
“Certain innovations, such as FedNow and a potential U.S. CBDC, could help bring the U.S. financial infrastructure into the digital era in a clear and simple way, without the risks or irrational exuberance brought by crypto assets,” the authors concluded.