In its 2023 economic report, the US White House presented several arguments against crypto assets. The White House asserted that they are primarily speculative investment tools and questioned cryptos’ supposed advantages.
“So far, it is evident that crypto-assets do not have any underlying value as investments. Also, they do not serve as a viable substitute for fiat currency,” the economic report stated.
Report Places The USD Above Crypto
The report emphasized that using cryptocurrencies is less efficient than the USD as a means of payment in the US. In addition, it explains that the robustness of the USD stems from crucial elements, such as trust in the legal system and governmental institutions.
According to the report, crypto does not have such properties. Furthermore, the government document highlights risk and instability as other downsides of crypto assets.
It also pinpoints “run risks” as a significant concern with stablecoins, which results from depositors demanding multiple redemptions in the conventional and crypto markets. The Economic Report also highlighted a crucial difference between bank deposits and stablecoins.
“Bank deposits in the United States are subject to a thorough set of supervisory and regulatory mandates,” the report added. Nonetheless, the downfall of Silicon Valley Bank was a crisis that spilled over into the traditional banking sector following several bankruptcies in the crypto industry.
Meanwhile, Cliff Marriott, the co-head of technology, telecommunications, and media for Goldman Sachs in Europe, has dubbed the crisis the “Lehman moment” for the tech industry. Meanwhile, various analysts have claimed that crypto offers more opportunities to the financial system.
However, the report has an opposing opinion. “Although crypto assets and its underlying technology have the potential to bring about new efficiencies, attempts to challenge fundamental economic principles have often led to financial disasters,” it stated.
Economic Report Talks About A Potential CBDC
According to the 2023 report, DeFi applications claim to enhance credit accessibility by reducing intermediary expenses. Nonetheless, the US government maintains that they present significant hazards to investors and the broader financial system.
On the other hand, the Economic Report mentioned the possibility of implementing a central bank digital currency (CBDC). The aim is to reduce some of the hazards linked to the private crypto industry.
The report emphasized that a CBDC would operate “under the oversight of a reliable entity.” Hence, it will fare better than crypto assets. Recently, the US Federal Reserve disclosed that its FedNow Service would launch in July as the Bank moves toward instant payment alternatives.
The revelation prompted discussions about a potential CBDC trial. Besides, the economic analysis recognizes that a CBDC could fulfill government policy goals.
However, it also acknowledges that certain risks could arise from CBDCs. The report noted, “similar to stablecoins backed one-to-one with fiat, CBDCs could also present risks related to credit availability.”