WASHINGTON – No aspect of the cryptocurrency industry escaped criticism in a scathing report from the White House this week.
The White House Council of Economic Advisers delivered a 35-page debunking of the idea that digital assets like Bitcoin are useful as an alternative to government-backed currencies, claims that crypto-distributed ledger technology could have some utopian applications, and the idea that it could be a hedge against inflation.
“Although the underlying technology is a smart solution to the problem of how to execute transactions without a trusted authority, crypto assets currently do not offer widespread economic benefits,” the board wrote. “They are speculative investment vehicles and not an effective alternative to fiat currencies. In addition, they are currently too risky to be used as payment instruments or to promote financial inclusion.
The comprehensive crypto critique, which fills one chapter in the book’s annual report that the White House sends to Congress each year, reflects a change in tone from President Joe Biden’s administration.
A year ago, Biden signed an executive order asking federal agencies to look at ways to reduce crypto risks without stifling “financial innovation.” This week’s report outlines the White House’s thinking that crypto cannot innovate other than the same financial disaster that caused Congress to deregulate the banking industry a century ago.
“The risks posed by crypto assets come from excessive speculation, high leverage, runaway risks, environmental damage from crypto asset mining, and fraudulent activities that harm investors and retail companies,” the report said.
The White House also noted that crypto assets “are a standard form of payment extorted from victims of ‘ransomware,’ in which malicious actors hack organizations and demand payment to release control of the victim’s network and often ignore the leakage of the victim’s stolen data.”
What crypto certainly promises is that it operates on a peer-to-peer computer network without institutional intermediaries like banks or governments. In the view of the White House, it is also a fundamental problem.
What caused the new hostility in the White House? Back when Biden issued the executive order, the crypto industry was worth more than $3 trillion and was already flying high, with stars like Tom Brady and Larry David supporting the benefits in Super Bowl ads.
Since then, crypto has suffered a number of embarrassments, such as the collapse of the “stablecoin” and the crypto exchange FTX, whose founder Sam Bankman-Fried was accused of committing all kinds of financial crimes during his time in the media. love In the past year, the industry has lost about two-thirds of its value — meaning people who invested in Brady’s advice may have lost money.
Crypto players hope that Congress will step in and free the industry from strict regulation by increasingly hostile federal agencies like the Securities and Exchange Commission; The White House suggested in the report that no new law was needed.
“Many activities in the crypto asset space are covered by existing regulations and regulators are expanding their ability to bring many new entities under compliance,” the White House said.
The Blockchain Association, an industry lobby group, said Tuesday it was disappointed by the White House report.
“We urge the Biden administration to consider how it will be remembered: as a leader of deep innovation or a roadblock for the global technological revolution,” Blockchain Association CEO Kristin Smith said in a statement.