White House Targets Crypto in Damaging Economic Report

The White House took aim at cryptocurrencies in a new report, arguing that many aspects of the digital asset ecosystem are causing problems for consumers, the financial system and the environment.

Monday’s report comes amid growing industry concerns that federal regulators want to debank crypto companies, though state and federal regulators have so far denied these claims. Still, the tone of the report is unlikely to allay these concerns.

Matthew Homer, a former deputy superintendent with the New York Department of Financial Services, told CoinDesk that the report was a “damned indictment of the space that makes their policy position crystal clear.”

“The amount of attention paid to digital assets is significant, especially when compared to other areas of financial services that have arguably been far more damaging in recent weeks. The assessment is striking for its definitive tone and broad brushstrokes,” he said.

The report looked at a number of claims and stated goals of the crypto industry, ranging from the role of cryptocurrencies as investment vehicles and payment tools to their potential use in payment infrastructure, saying that “many of them lack fundamental value” and notes other problems with the industry.

“It has been argued that crypto-assets can 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 middlemen extracting value from both the provider and the The hood to these arguments, however, paints a more complicated picture. To date, crypto-assets have failed to deliver any of these benefits,” the report said.

Several disasters in the crypto sector, including last year’s collapse of TerraUSD, BitConnect, and FTX, were cited as examples of how ordinary Americans were harmed.

Other examples pointed to more subtle frauds, such as Long Island Iced Tea changing its name to Long Blockchain to ride a wave of stock prices despite having nothing to do with blockchain at the time.

The report also took a moment to say that a centralized internet is easier, citing Signal creator Moxie Marlinspike.

It also mentioned that future systems such as the FedNow real-time payments network “could bring significant benefits to vulnerable segments of the population.”

“Some have suggested that near-instant digital payment systems like FedNow could reduce the need for digital money in circulation,” the report said. In this case, the benefits of circulating digital money after the launch of FedNow may be minimal. In fact, Federal Reserve Governor Michelle Bowman noted in August 2022 that “my expectation is that FedNow addresses the issues that some have raised about the need for a CBDC.’”

Despite listing these concerns, the report did not go into depth on recommendations for future regulations or Congressional actions that could address the risks mentioned.

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

The report also acknowledged that “some cryptoassets appear to be here to stay,” though it went on to note that “they continue to pose risks to financial markets, investors, and consumers.”

“Much of the activity in the crypto asset space is covered by existing regulations, and regulators are expanding their capabilities to bring a large number of new entities under compliance,” the report said, pointing to the Securities and Exchange Commission. “Other parts of the crypto asset space require coordination by various agencies and consultation on how to address the risks they pose.”

UPDATE (March 21, 2023, 23:45 UTC): Adds additional details.






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