“Many (cryptocurrencies) have no fundamental value,” claimed the White House a report released on the 20th of March. The Economic Report of the President is an annual report put together by the Chairman of the Council of Economic Advisors to the US President.
That was just one of a series of damning assessments made by the Biden administration in the report, which dedicated an entire chapter to essentially attempting to debunk the utility of cryptocurrency.
15% of the annual White House Economic Report is devoted to crypto FUDhttps://t.co/lQlAyXgfyJ pic.twitter.com/RTZacgXSUg
— Fred Ehrsam (@FEhrsam) March 21, 2023
Biden Administration Attacks Crypto
The report essentially claimed that crypto has so far failed to deliver on its promised benefits, such as improving payments systems, promoting 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 claimed. Rather, most innovation in crypto has actually been focused on generating artificial scarcity to pump asset prices, the Biden administration said. The report cited last year’s collapse of the Terra blockchain ecosystem and FTX cryptocurrency exchange as examples of how crypto users were harmed.
The Biden administration also took aim at claims that crypto is decentralized, commenting that blockchain-based applications are neither decentralized nor trustless. A small minority of miners perform the majority of mining in most assets, the report added, before deriding the fact that users must pass through a limited set of platforms to get access to crypto assets.
That is a particularly ironic statement coming from the Biden administration given that authorities and regulators have been pressuring US banks into cutting ties with the crypto industry in what some have called “operation chokepoint 2.0”, and in doing so reducing the average person’s options when it comes to accessing crypto assets. For what it’s worth, regulators have denied claims that they are actively looking to de-bank crypto companies.
The report did not make any meaningful recommendations for regulations and legislation that, in the future, could address some of its concerns about crypto. In the following chapter, report made a case for centralized solutions, including the soon-to-be-released real-time payment network called FedNow and on central bank digital currencies.
Biden Administration Missing the Forest for the Trees
When it comes to crypto, the Biden administration risks missing the forest for the trees. Yes, there are a tonne of scams, illegitimate projects and hackers in the space. Yes, there are lots of cryptocurrencies and networks masquerading as legitimate projects but are actually highly centralized and prone to corruption.
Yes, there are highly centralized crypto platforms (like FTX was) whose existence sort of defeats the point of crypto in the first place. But just because there are bad players and projects doesn’t mean that all the players and projects in the space are bad.
Take the Bitcoin network for example. Yes, it guzzles a lot of energy (as the Biden administration derides). But no one can seriously deny its high degree of decentralization and robustness.
The Biden administration seems not to understand or care about why decentralization is important. Bitcoin, an incorruptible, censorship-resistant network, acts as a bulwark against authoritarian governments who want to use their control over money to control their populations.
But maybe it shouldn’t be a surprise that people working in government, who tend to think the government knows best and should be handed more power, are having an allergic reaction to a technology designed to reduce the government’s power.
And it’s silly for the Biden administration to claim that most crypto innovation is actually just about creating artificial scarcity to pump prices when we are seeing the rapid emergence of truly decentralized finance ecosystems on the Ethereum network and its layer-2s and across other blockchains.
These decentralized finance ecosystems are literally rebuilding the entire financial system from the ground up once again, but with enhanced transparency, security and trust. Decentralized finance could make capital allocation much more efficient and may someday completely replace traditional banking.
Various scaling solutions (like layer-2s built on top of existing blockchains and Ethereum’s “sharding” proposal) mean that crypto will, in the future, be able to serve the masses.
By essentially labeling all crypto as bad based on the actions of bad actors within the space, the Biden administration risks robbing US citizens from future benefits offered by innovation in the crypto space. Meanwhile, the Biden administration’s anti-crypto stance risks putting disadvantaging the US as the global race to shape the fast-growing crypto industry heats up.
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This article was written for Business 2 Community by Joel Frank.
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