The White House, in a scathing report on cryptocurrencies, has said crypto-assets do not have any "fundamental value", nor do they act as an "effective alternative to fiat money" or "make payments more efficient".
The Economic Report of the President, which was published on March 22, 2023, a publication of the Council of Economic Advisers, outlines the US government's economic priorities and policies.
With this report, it has become clear that regulators in the US could take a stronger stance against crypto companies even though they have avoided taking such a position so far. The Indian government has also taken a similar approach towards the crypto industry due to various issues associated with the technology.
The Centre is yet to come up with comprehensive legislation on cryptocurrencies, though it has taken steps to curb its misuse for illegal activities.
The White House report says crypto innovation has been mostly about creating artificial scarcity to support its assets’ prices — and many of them have no fundamental value.
"This raises the question of the role of regulation in protecting consumers, investors, and the rest of the financial system from panics, crashes, and fraud related to crypto assets. Even so, as companies and governments experiment with DLT, it is conceivable that some of their potential benefits may be realised in the future," it adds.
On the perceived appeal of crypto assets, it says crypto assets have gained substantial popularity in recent years — particularly since the beginning of the COVID-19 pandemic in 2020.
"The estimated market values of selected crypto assets have increased significantly in recent years and reached a collective peak of nearly $3 trillion in November 2021."
It says due to a large downturn in prices in the following year by December 2022, the total collective market value declined to a little under $1 trillion.
"It largely reflects the failures of certain prominent crypto asset projects and firms."
The White House acknowledges the fact that the development of crypto assets and their underlying distributed ledger technology has the potential to transform industries and business models.
"Both the number of crypto assets and their combined market value have risen over time, reflecting their increasing popularity around the world," says the report, adding that its proponents claim it offers benefits such as crypto can act as investment vehicles; can offer money-like functions without relying on single authority; fast digital payments; and financial inclusion.
In reality, says the White House report, the crypto assets are mostly speculative investment vehicles; don't perform all the functions of money as sovereign money; stablecoins can be subject to run risk; can be harmful to consumers and investors; and offer limited economic benefits.
Other risks that apply to crypto assets include leverage risks, price volatility, illicit finance risks, and ransomware uses, the report says.
Meanwhile, India has time and again said that crypto as technology has a lot of potential, though it could be used in illicit ways, including money laundering and tax evasion. The government has also sought international cooperation on the issue. To tighten crypto rules in the country, the government announced a 30% tax on crypto in the Union Budget 2022. It also said a 1% TDS will also be held back each time an investor sells a virtual digital asset over a certain threshold.
Despite the growing crypto industry in India, the Reserve Bank has also cautioned against risks associated with virtual currency. Finance Minister Nirmala Sitharaman last month also said the emerging new techs like crypto assets and Web3 require major collaboration on a global level for making specific legislations.
