White House Economic Report: Cryptocurrency Falls Short of Promises

• The White House Council of Economic Advisers released the Economic Report of the President on March 20.
• Crypto assets are discussed on 30 pages of the Economic Report.
• Most of its comments on cryptocurrency assets draw attention to its issues and the need for regulation.

The White House Council of Economic Advisers has criticized crypto assets. In the Economic Report of the President, published on March 20, there are over 30 pages detailing the council’s thoughts on crypto assets. The report noted flaws and problems related to crypto assets.

The Economic Report noted, among other things, that none of the benefits promised by cryptocurrencies have materialized. These benefits include cryptocurrency’s promise to improve payment systems, increase financial inclusion, and more.

Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits.

Furthermore, the Economic Report criticizes crypto assets as a form of investment. According to the report, crypto assets do not currently have a fundamental value, serve as a substitute for fiat currency, increase financial inclusion, or improve the efficiency of payments. “Instead, their innovation has been mostly about creating artificial scarcity in order to support crypto assets’ prices,” according to the report.

Then, the Economic Report points out how DeFi creates serious risks to investors. Namely, the report points to the use of significant leverage and the performance of regulated functions without compliance with appropriate regulations. According to the report, DeFi platforms that operate as unregulated banks, broker-dealers, exchanges, etc. should adhere to all applicable laws and regulations.

The White House Council of Economic Advisers accuses some supporters of crypto assets of being ignorant of fundamental economic principles in a particularly harsh statement. “Although advocates often claim that digital assets, particularly crypto assets, are a revolutionary innovation, the design of these assets frequently reflects an ignorance of basic economic principles that have been learned in economics and finance over centuries.”

This inadequate design is often detrimental to consumers and investors.

Ultimately, the Economic Report emphasized the need for effective regulation within the crypto asset space. Although the report acknowledges some of the potential of crypto assets and the technology that underpins them, it also claims that there are currently more issues than advantages.

Notably, the report discussed how a U.S. CBDC might modernize the country’s financial system without the dangers or irrational exuberance that come with crypto assets.