In the section titled “The Perceived Appeal of Crypto Assets,” the White House spends many pages describing how Bitcoin works before denying the leading cryptocurrency the function of money by definition. Notably, BTC allegedly fails to fulfill two out of three characteristics of money.
“Bitcoin Is Not Money”
First, the report cites that Bitcoin does not meet the characteristics of a unit of account because the values of goods and services are not denominated in BTC, but in US dollars, and a conversion is required. Addressing the question of whether Bitcoin can serve as a medium of exchange, the White House writes that BTC is “not as effective a medium of exchange” as the US dollar.
“The strength of the U.S. dollar is derived from several important factors, such as faith in government institutions and the legal system, but cryptocurrencies lack these factors, “the report said. Third, the report also denies BTC the characteristic of a store of value due to its “significant volatility.”
For example, the value of a Bitcoin (relative to the U.S. dollar) increased by over 1,000 percent from March 2019 to March 2021, and then decreased by over 70 percent from November 2021 to October 2022. This volatility means that anyone who is using Bitcoins to store their savings is subject to high-volatility risk in their purchasing power.
For Bitcoiners, the accusations should be more than flimsy given the massive devaluation of the USD against Bitcoin, record high inflation, the US banking crisis, bailouts for banks, among others. “What the White House cannot say, of course, is that the value of Bitcoin is in protecting you from their abuses of authority, monetary or otherwise,” Troy Cross wrote in response to the report.
As one might expect, the White House also attacks Bitcoin mining as an energy-guzzling monster in the report. The report references a 2022 University of Cambridge study that claims Bitcoin mining consumed more energy in 2021 than several entire countries, including Finland, Belgium and Chile. Any distinction is shunned, while the report claims further environmental damage such as noise, air and water pollution.
“Not all crypto mining operations consume the same amounts of power. […] Despite Ethereum’s switch to proof-of-stake, Bitcoin has not announced plans to make a similar change,” the report continues.
Dennis Porter, founder of SatoshiAct, who advocates about the positive effects of BTC mining, wrote disillusioned that it is becoming clear that the voices of reason on Bitcoin and digital assets have left the White House. “We hope they come back.”
The White House: “Bitcoin has not announced plans to make a similar change” to proof-of-stake. pic.twitter.com/97sKw6DKWa
— Dennis Porter (@Dennis_Porter_) March 21, 2023
CBDC Are The Better Bitcoin, According To The White House
In complete contrast, the report states that a Central Bank Digital Currency (CBDC) represents the possibility of introducing a digital form of money. “While operating under the supervision of a trusted authority, both these mechanisms have the potential to realize many of the benefits that crypto asset developers have promised,” the report states and further explains:
A potential U.S. CBDC could also help support other policy goals. For example, a potential U.S. CBDC could help ensure that such payment systems are aligned with the principles of human rights, democratic values, and privacy.
Dave Birnbaum, Director of Products at Coinbits has strong words for the report. In a Twitter thread, he writes that the arguments in the report sum up the banking panic of 1907, when private bankers pooled their resources to save the system.
“This is cited as a lesson that the gov’t should have that power instead, so they created the Fed to wield it in place of private citizens,” says Birnbaum, who goes on to discuss that the section on cryptocurrencies can be understood as a “micro-aggression, implying that those who think digital assets are appealing are party to something like a Marxian false consciousness.”
Mike Novogratz, CEO of Galaxy Digital, responded in a tweet:
Maybe they should refund me all the taxes I have paid over the past 10 years on my crypto tradingSponsored Product. They are wrong! $BTC is report card on the stewardship of the economy. And its rise is telling us something.
At press time, the BTC price stood at $28,103, driven by the US banking crisis and the renewed monetary stimulus by the Federal Reserve.
Featured image from iStock, chart from TradingView
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