White House Economic Report Outlines Concerns for Bitcoin and Cryptocurrencies

In a recent report, the Biden administration highlighted their concerns for Bitcoin and cryptocurrencies, claiming that certain elements of the ecosystem for digital assets are problematic for consumers, the financial system, and the environment.

The Council of Economic Advisers’ annual publication, “Economic Report of the President,” explains the president’s economic priorities and initiatives. A complete chapter on digital assets and “economic concepts” was featured in the March 2023 issue.

This section covered Bitcoin’s features, as well as a number of “possible benefits that proponents claim for this popularity of crypto assets.”

The report examined multiple assertions and objectives made by the cryptocurrency sector, examining everything from cryptocurrencies’ potential usage in payment infrastructure to their use as investment vehicles and payment methods. Many cryptocurrencies, according to the report, “do not have a fundamental value,” among other problems with the industry.

The report states:

It has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and recipient. Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits.

Past incidents within the cryptocurrency industry, including the failure of Terra, BitConnect, and FTX, were used as examples for how American citizens suffered.

Other examples include when Long Island Iced Tea changed its name to Long Blockchain in order to profit from a rising stock price despite the company having nothing to do with blockchain at the time.

According to the report, the FedNow real-time payment network, among other upcoming solutions, “could bring significant benefits to vulnerable segments of the populations.” Some have argued that almost instantaneous digital payment platforms like FedNow may lessen the necessity for digital currency to be in circulation. 

In this case, the benefits of circulating digital money after FedNow is launched may be minimal. In fact, Federal Reserve Governor Michelle Bowman commented in August 2022 that ‘my expectation is that FedNow addresses the issues that some have raised about the need for a [central bank digital currency].’

Despite outlining these concerns, the report did not go into great detail about suggestions for new laws or congressional measures that would address the indicated risks.

The section’s conclusion noted that both government entities and private companies “may still find productive uses in the future” for the underlying distributed ledger technology.

The report noted that some crypto assets appeared to be “here to stay,” but it also pointed out that these assets continue to pose hazards to the financial markets, investors, and consumers.