president

‘Crypto FUD’ — Industry outraged as White House report slams crypto

The report included 35 pages seemingly aimed at debunking the merits of crypto assets.

Crypto executives have expressed irritation over the latest White House economic report — which notably features an entire chapter dedicated to casting doubts on the merit of digital assets.

The Economic Report of the President, released on March 20, marks the first time the White House has included a section on digital assets since it first began issuing the annual economic policy report in 1950.

The co-founder of digital asset investment firm Paradigm, Fred Ehrsam, remarked that 15% of the Economic Report was dedicated to “crypto FUD.”

The report includes 35 pages dedicated to debunking the “Perceived Appeal of Crypto Assets,” along with a short section on the FedNow payment system and central bank digital currencies.

The report’s main argument is that crypto assets fail to deliver on their “touted” benefits, such as improving payment systems, financial inclusion and creating mechanisms to transfer value and intellectual property, stating:

“Instead, their innovation has been mostly about creating artificial scarcity in order to support crypto assets’ prices — and many of them have no fundamental value.”

It also argues that cryptocurrencies fail to perform the functions of sovereign money — such as the U.S. dollar — as crypto prices fluctuate too wildly to be a stable store of value, nor can they function as a unit of account or medium of exchange.

Excerpt from Chapter 8: Digital Assets: Relearning Economic Principles Source: Economic Report of the President

The report also takes aim at stablecoins, arguing they are subject to run risks and thus too risky to satisfy their role as a “fast payment” instrument.

Blockchain Association CEO Kristin Smith called the latest presidential report “disappointing,” saying it shows that some in the government appear “increasingly allergic” to the burgeoning crypto industry, adding:

“We urge the Biden administration to consider how it will be remembered: as a leader of profound innovation or a roadblock to a global tech revolution.”

Decentralization is also highlighted in the report, which argues that “despite claims of being decentralized and trustless, blockchain-based applications are in practice neither.”

Users access crypto assets by going to a limited set of crypto asset platforms, while a small group of miners performs the majority of mining in most crypto assets, it argues.

Related: House Republicans directly criticize Biden administration for digital asset policies

The latest annual economic policy report was published some two weeks after the collapses of Silvergate, Silicon Valley and Signature banks — all three of which had served aspects of the crypto industry. 

Dan Reecer, chief growth officer at decentralized finance platform Acala Network, claims that the report comes “just days” after Operation Chokepoint 2.0 was executed on crypto-friendly banks.

Source: Twitter

He also noted an “obvious early warning” of an upcoming United States CBDC, or digital dollar, referencing a section of the report that seemingly touts the benefits of a U.S. central bank-controlled currency. 

Related: Unstablecoins: Depegging, bank runs and other risks loom

President of Paraguay vetoes crypto regulation law

The bill was approved by the nation’s Senate in July as low-energy costs continue to boost mining activities in the country.

Paraguay’s president, Mario Abdo Benítez, vetoed a bill that sought to recognize cryptocurrency mining as an industrial activity on Monday. He reasoned that mining’s high electricity consumption could hinder the expansion of a sustainable national industry. 

The decree stated that crypto mining uses intensive capital with low manpower usage and, therefore, would not generate added value on par with other industrial activities. Around the world, cryptocurrency is one of the largest job creators. LinkedIn’s Economic Graph shows that crypto and blockchain jobs listing rose 615% in 2021 compared to 2020 in the United States.

In accordance with the bill’s sponsor, Senator Fernando Silva Facetti, the law aimed to promote crypto mining through the use of surplus electricity, but the Paraguayan government chose to ignore the activity in the country:

The Paraguayan Senate ultimately approved the proposal on July 14, recognizing crypto mining as an industrial activity. They established a 15% tax on its related economic activities, but the decree sees the brackets as an indirect incentive to the industry. It says:

“By subordinating the rate applicable to the users of crypto miners to just a small percentage above the current industrial rate, an indirect industrial incentive would be offered to crypto mining.”

According to the document, in the last twelve months, industrial investment grew by 220% in the country to $319 million, while the GDP increased more than 4% in the past five years. If this rate continues, the national industry could require the total amount of energy produced and available in the country in order to remain sustainable.

“If Paraguay wants to intensify crypto mining today, in the next four years it will be forced to import electricity,” the decree said.

The bill approved by the Senate stipulates that miners would have to apply for a license and request authorization for industrial energy consumption. It also established the Ministry of Industry and Commerce as the primary law enforcement authority and the Secretariat for the Prevention of Money or Asset Laundering to supervise crypto investment companies.

The low-energy costs in Paraguay have spurred local and foreign companies to install mining infrastructure in the country since 2020. In December 2021, household electricity costs were $0.058 per kWh and business electricity costs were $0.049 per kWh, according to global petrol prices reports.