The White House Deems Crypto Assets As Mostly Speculative Investment

The White House Deems Crypto Assets as Mostly Speculative Investment

The "Economic Report of the President" was published on Monday and covered crypto assets. The section titled "The Perceived Appeal of Crypto Assets" describes the currencies as "mostly speculative investment vehicles" that are "unbacked" and "traded without fundamental anchors." The White House insists that crypto-assets do not deliver on their promises and do not "perform all the functions of money as effectively as sovereign money, such as the U.S. dollar."

The Economic Report Covers Crypto Assets

The recently published "Economic Report of the President" covers various topics, including the war in Ukraine, COVID-19, infrastructure, and US employment. The report also covers bitcoin and other crypto assets. The Biden administration considers crypto assets too volatile compared to traditional assets. According to the White House, crypto assets are "mostly speculative investment vehicles" and fail to serve as effective units of account.

The report argues that cryptocurrencies do not perform well as a medium of exchange due to their limited acceptance and high volatility, which prevents them from being safe stores of value. The White House also believes that there is a conflict of interest when crypto assets are seen as both a form of money and an investment vehicle. "In summary, being speculative assets, cryptocurrencies are currently ineffective alternatives to sovereign money, such as the U.S. dollar," the authors claim.

The White House points out that crypto-assets do not fulfill basic monetary promises and warns that stablecoins can pose a risk. The report highlights the Terra stablecoin implosion and cautions that stablecoins could potentially "disrupt financial stability." While the White House acknowledges the benefits of distributed ledger technology (DLT) as a significant accomplishment in computer science, it also notes that "there have been limited economic benefits" of DLT.

The White House Insists on Compliance for Defi Platforms 

The authors of the report are also critical of Web3, referring to it as the "so-called new Internet" and dismissing the benefits claimed by its proponents. The White House concludes that crypto-assets do not offer investments with any fundamental value and that they cannot serve as an effective alternative to fiat money. The innovation behind crypto-assets is mostly focused on manipulating prices by creating artificial scarcity. The White House is wary of financial innovation and the inherent risks, and it mentions the decentralized finance (Defi) protocols.

The Biden administration is quite skeptical of the value and potential of crypto assets and Defi due to volatility concerns, limited acceptance, and regulatory compliance. According to White House researchers, the best approach to this new technology is to regulate crypto-assets. Biden’s Council of Economic Advisers is critical of the "illicit finance risks," pointing out that bad actors could leverage digital assets to inflict disruption in financial markets. Since the White House report was published, it has become a topical conversation for crypto proponents on social media and forums.

What is your take on the ‘Economic Report of the President’ covering crypto-assets? Please post your comments.