In the wake of numerous cryptocurrency-related frauds and disasters, the White House has released a comprehensive report, lambasting the lack of disclosure surrounding crypto assets. Described by the White House as a “massive, 513-page annual report”, the 2023 Economic Report of the President—issued along with a yearly update issued by the Council of Economic Advisers—makes clear the administration’s stance on digital assets.
Reiterating the stance that digital assets have been so notoriously volatile and subject to fraud, the report goes on to emphasize that the design of such assets “frequently reflects an ignorance of basic economic principles”. These inadequate designs, it continues, are often “detrimental to consumers and investors”.
Crypto proponents are pointedly instructed in the report to “relearn the lessons from previous financial crises the hard way”, positing that it has failed in its quest to improve financial inclusion, payments systems and even the distribution of intellectual property and financial value.
Aside from its lack of ability to function as a replacement for fiat money, there have been further pitfalls associated with cryptocurrencies, including the impact the crypto sector has had on the physical environment.
Advocates of blockchain technology had argued that decentralised governance would create a unique “Web3”, yet the authors of the report have pointed out the irony in this. Writing that “Once a distributed ecosystem centralizes around a platform for convenience, it becomes the worst of both worlds. Centralised control, but still distributed enough to become mired in time”, it is clear that the White House feels strong levels of scepticism towards digital assets.
The report ties it all together in the end, combining its evidence of the lack of disclosure to investors of crypto assets with the chilling conclusion that “most crypto assets have no fundamental value”.
But is this the end of the road for crypto?
The administration has criticized the lack of regulation and enforcement, as well as the havoc wreaked by the collapse in the value of different crypto assets. Still, regulators have recently shown a desire to clarify the rules surrounding crypto, with some house hearings expressing support for market reform and keeping the business within the United States.
Of course, there are external factors which have somewhat warped the Obama-era stance on digital assets. The winds of economic change have battered the crypto sector in 2021, with the rise in inflation, volatile treasury markets and calls for Americans to invest in more traditional assets.
Ultimately, it’s this cyclical nature that provides hope for crypto. Recent reports have suggested that FedNow, the brand new central bank digital currency from the Federal Reserve, could reduce the need for digital assets, with the same potential being seen in other areas.
Facing criticism in the immediate future, it’s now the responsibility of crypto advocates to take the White House’s message on board, re-educating themselves on the economic principles that have been proven over centuries. To understand the pitfalls of their chosen field, and to learn to build the frameworks needed to keep their industry viable in the long term.