The White House took aim at cryptocurrencies in a new report, arguing that many aspects of the digital asset ecosystem create problems for consumers, the financial system and the environment.
Monday’s report comes amid growing industry concerns that federal regulators are trying to unbank crypto companies, though state and federal regulators have so far denied those claims. Still, the report’s tone is unlikely to allay those concerns.
Matthew Homer, a former Assistant Superintendent at the New York Treasury Department, told CoinDesk the report is a “damning indictment of the space that makes their political position crystal clear.”
“The amount of attention being paid to digital assets is significant, especially when compared to other areas of financial services, which have arguably been far more damaging in recent weeks. he said.
The report looked at a range of claims and stated goals of the crypto industry, ranging from cryptocurrencies’ role as investment vehicles and payment tools to their potential use in payments infrastructure, saying that “many of them have no intrinsic value,” and noted other problems with the sector.
“It has been argued that crypto assets can provide other benefits such as: B. improving payment systems, increasing financial inclusion, and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries who extract value from both the provider and the recipient. However, the hood on these arguments reveals something more complicated Picture. To date, crypto assets have delivered none of these benefits,” the report reads.
Various disasters in the crypto sector, including last year’s collapse of TerraUSD, BitConnect, and FTX, have been cited as examples of how everyday Americans have been harmed.
Other examples pointed to more subtle scams, such as Long Island Iced Tea changing its name to Long Blockchain to ride a stock price wave, even though it was unrelated to blockchain at the time.
The report also took a minute to say that a centralized internet would be easier, citing signal inventor Moxie Marlinspike.
It also mentioned that upcoming schemes like real-time payments network FedNow “could bring significant benefits to vulnerable populations.”
“Some have suggested that near-instantaneous digital payment systems like FedNow could reduce the need for digital money to circulate,” the report said. “In that case, the benefits of circulating digital money after FedNow’s launch may be minimal. Indeed, in August 2022, Federal Reserve Governor Michelle Bowman commented, ‘My expectation is that FedNow will address the issues that some have about the need for a CBDC.'”
While these concerns were noted, the report did not detail recommendations for future regulations or Congressional action to address the identified risks.
The section’s conclusion acknowledged that the underlying distributed ledger technology “may continue to find productive applications in the future” for both government agencies and private companies.
The report also acknowledged that “some crypto assets appear to be here to stay,” while noting that “they continue to pose risks for 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 large numbers of new companies into compliance,” the report said, citing the Securities and Exchange Commission. “Other parts of the crypto-asset space require coordination by different authorities and considerations on how to address the risks they pose.”
UPDATE (21 Mar 2023, 23:45 UTC): Adds additional details.