White House Dismisses Crypto As “Detrimental” and With “No value or good qualities”
Earlier this week, the US government under President Joe Biden released the economic report from the White House taking an aim at cryptocurrencies while neglecting their benefits and rather emphasizing on the negative aspects.
In its economic report, the US government mentions that the blockchain technology has fuelled the rise of ““highly volatile” and “fraudulent” cryptocurrencies that are “detrimental to consumers and investors”.
It adds that digital assets by design are flawed reflecting an “ignorance of basic economic principles,” and that the innovation has been “mostly about creating artificial scarcity in order to support crypto assets’ prices”.
The report goes further stating that crypto assets don’t provide any fundamental value and neither are they an effective alternative to fiat money, or made payments more efficient, or have improved financial inclusion.
Interestingly, this report comes just at a time when the US banking system has been undergoing a major stress and the Fed and FDIC had to intervene earlier this month while closing three banks in a week’s time. Two of them - Silvergate Bank and Signature Bank - were crypto-friendly banks.
Some lawmakers also stressed that the bank’s exposure to crypto assets led to the downfall. However, there’s no specific evidence of the same. Instead the Fed’s sudden rate hikes over the last year put the banking system under stress as the old treasury bonds purchased by the banks became of little value.
Besides, the report also highlights several areas wherein the cost of crypto has adversely impacted the financial system, the consumers, and the physical environment. The US government didn’t miss out on highlighting the cost of crypto mining activities on the environment.
Taking a dig at Bitcoin, the US government said that it is in no way “money”. The report says that BTC doesn’t meet the characteristics of unit of account as the value of goods and services aren’t denominated into BTC but rather USD.
Furthermore, it states that Bitcoin is also not “effective as a medium of exchange”. “The strength of the U.S. dollar is derived from several important factors, such as faith in government institutions and the legal system, but cryptocurrencies lack these factors,” it notes.
The US government has completed rejected the claims that Bitcoin is an effective store of value. It added: “the value of a Bitcoin (relative to the U.S. dollar) increased by over 1,000 percent from March 2019 to March 2021, and then decreased by over 70 percent from November 2021 to October 2022. This volatility means that anyone who is using Bitcoins to store their savings is subject to high-volatility risk in their purchasing power”.
However, we have seen Bitcoin outperforming broader equities and even the popular store of value aka the physical Gold. To an extent, the yellow metal has derived just the inflation beating returns. However, Bitcoin has gained more than 70% since the start of 2023.
Furthermore, Bitcoin has performed exceptionally well in the high inflationary environment and also delivered when trust in the banking systems have dropped considerably.