Issued by the White House since 1950, this report on economics and economic policy is partially devoted to cryptocurrencies for the first time in its history. Unfortunately, the words in it are far from flattering. This prompted an immediate reaction from the community and industry experts.
A lot of attention devoted to cryptocurrencies
A recent economic report released by the White House, caused a wave of discontent among cryptocurrency industry leaders. The document contained 35 pages devoted to analyzing the “attributed attractiveness of digital assets.”
The report found that cryptocurrencies fail to deliver their “classic” benefits, such as improving payment systems. They are also far from providing financial investment, or creating new ways to transfer value and intellectual property. The report’s authors question the quality of many digital assets and accuse the market of artificially propping up their prices.
But industry leaders disagree with this approach. Many of them stress that cryptocurrencies already bring tangible benefits to users, such as fast and cheap transactions without intermediaries, or the ability to store value outside the traditional banking system.
Lack of understanding of cryptocurrencies
Another negative feature of digital assets included in the report is their high volatility. This results in the fact that cryptocurrencies cannot be seen as sovereign money similar to the dollar. For this reason, they cannot be a store of value or a medium of exchange.
In one of the chapters, a lot of attention was paid to stablecoins, which, according to the text’s authors, are subject to the risk of a run and may not be measurable as a tool for quick payments. However, Kristin Smith of the Blockchain Association expresses disappointment at such an approach on the part of the government, saying they should be leaders in innovative technologies, not blockchain for revolution.
The report also emphasizes the importance of decentralization in the context of blockchain-based applications. Its authors argue that in practice, such applications are neither decentralized nor trusted, which calls into question their real value. Users have limited access to cryptocurrency assets, and most mining is carried out by a small group of miners.
The timing of the document’s publication is of paramount importance
The economic policy report was released to the public just days after the troubles that befell Silvergate, Silicon Valley and Signature banks. All three of them were associated with servicing the crypto industry.
The document also mentions the planned introduction of the digital dollar, or US CBDC. Although the section appears to extol the virtues of a currency controlled by the U.S. central bank, it may also be an “obvious early warning” for the cryptocurrency market.