- The industry is concerned the government wants to deprive crypto companies of banking services
- Payment systems like FedNow could minimize the need to distribute digital money
The US President’s recent Economic Report takes aim at cryptocurrencies and claims multiple aspects of the space are making problems for the fiscal system, consumers, and the environment.
The report is published by the Council of Economic Advisers annually. Its goal is to clarify the President's economic policies and priorities. There is a whole chapter on crypto in the March issue.
De-banking crypto companies
The report emerges against the backdrop of rising industry concern that the US government wants to deprive crypto companies of banking services. Its tone is unlikely to ease these concerns.
Former NYDFS superintendent Matthew Homer told CoinDesk:
The report is a damning indictment of the space that makes their policy position crystal clear. The amount of attention given to digital assets is substantial, especially when viewed in comparison to other areas of financial services that have arguably been far more detrimental over the past few weeks.
Crypto has no “fundamental” value
The report covered several claims and stated objectives from within the crypto space, including the use of crypto in payment infrastructure and its role as a payment tool or an investment vehicle. According to the authors, many cryptos have no fundamental value. The report states:
It has been argued that crypto assets may 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 intermediaries that extract value from both the provider and recipient. Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits.
The report cited the collapses of Terra Luna, FTX, BitConnect and others as examples of how the ordinary consumer took the fall.
It drew attention to cases of more subtle fraud, like the name change of Long Island Iced Tea, which adopted Long Blockchain to profit from rising stock prices. The company had no link to blockchain.
“Centralized internet” is easier
The report stated it was easier to sustain centralization of the internet, adding that the upcoming real-time payment system FedNow could bring major advantages to vulnerable social groups.
The authors believe such payment systems could minimize the need to distribute digital money. The benefits of doing so after launching FedNow could be “minimal”.
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