The White House issued a new report criticizing digital assets, saying that they failed to fulfill their original promises and brought risks to consumers and the entire U.S. financial system.
The report argues that digital assets have been touted as tools for distributing intellectual property and financial value, better payment mechanisms, means of increasing financial inclusion, and ways of reducing financial intermediation, but “so far, cryptocurrencies have not delivered any these promises.”
According to the report, digital assets do not yet provide any investment of fundamental value as a viable alternative to fiat currency, improving financial inclusion or improving payment efficiency.
Instead, their innovation is primarily about creating artificial scarcity to prop up the price of digital assets that lack fundamental value. This has raised concerns among regulators about protecting consumers, investors and the rest of the financial system from panics, crashes and fraud related to digital assets.
The report also highlighted concerns about the environmental impact of digital assets, noting the high energy consumption associated with the mining and transaction processing of digital assets such as bitcoin BTC 4.70%.
The report recommends that regulators take action to protect consumers and the financial system from risks posed by digital assets, including potential market manipulation, cybersecurity risks and illegal activities.
The report comes as digital assets continue to attract attention from investors and the financial industry, with some companies adopting cryptocurrencies as a means of payment and investment. However, the report recommends that such adoption be proceeded with caution and with regulatory oversight.
While the report acknowledges the innovative potential of blockchain technology, it stresses that such innovation should not come at the expense of financial stability and consumer protection.
The report calls for continued research and monitoring of digital assets to assess their potential benefits and risks, and recommends that regulators cooperate to develop a regulatory framework for digital assets.
