In a massive 513-page annual report released today, the White House took aim at digital assets, emphasizing their negative aspects and downplaying their potential benefits. The Economic Report of the President, issued with the yearly update of the Council of Economic Advisers, warns that blockchain technology has fueled the rise of “highly volatile” and “fraudulent” digital assets that are “detrimental to consumers and investors.”
According to the report, the inadequate design of digital assets reflects an “ignorance of basic economic principles,” and their innovation has been “mostly about creating artificial scarcity in order to support crypto assets’ prices.” In addition, the report states that crypto assets have not provided any fundamental value, nor have they acted as an effective alternative to fiat money, improved financial inclusion, or made payments more efficient.
The report highlights several areas where the costs of crypto have adversely impacted consumers, the financial system, and the physical environment. It claims that the mining of cryptocurrencies has contributed to environmental degradation, and the potential for fraud and theft in the crypto market has caused concerns for regulators.
“In addition to the decentralized custody and control of money, 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. So far, crypto assets have brought none of these benefits,” the report says.
The report’s conclusion is that crypto advocates need to go back to school to relearn the lessons from previous financial crises “the hard way.” It suggests that digital assets require more regulation and transparency to protect investors and consumers from fraudulent activities.
However, not everyone agrees with the report’s assessment of crypto. Some argue that digital assets can provide an alternative to traditional financial systems that are not accessible to everyone. They also point out that blockchain technology has the potential to create new markets and unlock value in a way that was not possible before.