On Monday, U.S. President Joe Biden released his administration’s economic report, which focused on cryptocurrencies.” The section titled “The Perceived Appeal of Crypto Assets” described the currencies as “mostly speculative investment vehicles” that are “unsupported” and “traded without a fundamental anchor. The White House argues that crypto assets do not deliver on their promises and do not “perform all the functions of money as effectively as sovereign money like the U.S. dollar.”
Crypto assets and defi
are the focus of the Biden administration’s economic report.
The recently released “President’s Economic Reportcovers a variety of topics, including the war in Ukraine, Covid-19, infrastructure, and U.S. employment statistics; on page 239, it examines and attempts to refute proponents’ claims about bitcoin and other crypto assets. The Biden administration views crypto assets as too volatile when compared to traditional assets. According to the White House, crypto assets are “mostly speculative investment vehicles” and cannot serve as valid units of account.
The report argues that cryptocurrencies, due to their limited acceptability and high volatility, do not work well as a medium of exchange and cannot be a reliable store of value. The White House also believes that a conflict of interest would arise if crypto assets were considered both a form of money and an investment vehicle.” In summary, in addition to being speculative assets, cryptocurrencies are currently ineffective substitutes for sovereign money like the U.S. dollar,” the report’s authors argue.
The White House points out that crypto assets do not deliver on their basic monetary promises and warns that stablecoins could pose a run risk. Citing the collapse of the Terra stablecoin as an example, the report notes that the White House emphasizes that stablecoins could potentially “disrupt financial stability.” As such, “stablecoins are currently too risky to meet this need,” according to the President’s Economic Report. While acknowledging that distributed ledger technology (DLT) is an important achievement in computer science, the White House also notes that “the economic benefits” from DLT are “limited.
The Biden administration insists that the Defi platform “should operate in compliance with existing regulations and rules”
The report’s authors also criticize Web3, calling it the “so-called new Internet” and dismissing the benefits claimed by its supporters. The White House authors conclude that crypto assets do not offer investments of fundamental value and cannot be an effective alternative to fiat money. Instead, the innovation behind crypto assets is primarily focused on creating artificial scarcity to support their prices. According to the White House, many crypto assets have no fundamental value. The Biden administration is wary of financial innovation and sees inherent risks. For example, the report highlights decentralized finance (defi) and broad defi protocols.
“The basic promise behind defi is to replace financial intermediaries, instead connecting savers and borrowers (or buyers and sellers) directly, saving the spread that traditional intermediaries charge to create matches in software.” The authors explain.” But they also pose serious risks to investors and at least two risks to the broader financial system: the use of significant leverage and performing regulated functions without complying with proper regulations. Defi platforms acting as unregulated banks, broker-dealers, exchanges, and other regulated entities should operate in compliance with existing regulations and rules.”
Overall, the Biden administration is skeptical of the value and potential of crypto assets and defi because of its volatility, limited acceptance, and concerns about regulatory compliance. White House researchers suggest that regulating crypto assets is the best approach to this new technology, whether it lasts or not. Biden’s Economic Advisory Board has criticized “illicit financial risks,” pointing to the potential for bad actors to leverage digital assets to disrupt financial markets. Since the White House report was released, it has become a hot topic of conversation among crypto advocates on social media and forums.
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