New Biden Report on Crypto is Predictable
"USDC Good, Crypto Bad"
Tell me you don’t understand Bitcoin without saying you don’t understand Bitcoin.
That’s a popular phrase used on Twitter, used to describe a particularly bad or uninformed position regarding Bitcoin. Or crypto in general.
It applies, pretty perfectly, to the just-released “Economic Report of the President - 2023.”
Chapter Eight of the 513-page report deals with crypto. The chapter title, in its condescending manner, is called “Digital Assets: Relearning Economic Principles.” Translation: You crypto bros are trying to reinvent economic principles, and you are failing.
The report gets right to the point on its first page. “Digital asset proponents are now aspiring to create a decentralized financial system without relying on governments and their regulatory frameworks, which were shaped by important lessons from previous crises.”
Cryptocurrencies, especially Bitcoin, are attempting to create a financial system that doesn’t have to rely on government. Yes. And that, as they say, is a feature, not a flaw.
The Goals of Crypto, and the White House’s False Claims
The reports correctly lists some of the goals of cryptocurrencies:
Decentralization
Improved payment systems
Financial inclusion
Their conclusion: “So far, crypto assets have brought none of these benefits.”
False, on every point. How could some one be tasked with writing a report such as this and get so much of it wrong?
Bitcoin has emerged as the only truly decentralized asset class in existence. And that can’t be argued. No staff, no headquarters, no budget, no centralized control. Of course, a report like this will conveniently not distinguish between Bitcoin and other crypto projects.
Bitcoin, especially through the use of the Lightning Network, has absolutely created a better and faster payment system, not to mention cheaper. Bitcoin is making antiquated remittance systems like Western Union obsolete. International remittances, sent by millions of people in the US alone, are faster and exponentially cheaper than the traditional services, like the aforementioned Western Union.
The report does not back up its position that crypto doesn’t promote increased financial inclusion. Because it can’t. Crypto is exploding around the world, because literally billions of people have no access to banks, but do have cellular telephones. And here in the US, large pockets of minorities are embracing crypto. Why? Because many have faced barriers to entering the banking system.
More Falsehoods in the White House Report
Some of the statements made in the President’s report would be LOL laughable if they weren’t so infuriating. Infuriating to anyone just slightly schooled in Bitcoin.
Artificial Scarcity. “Their innovation has been mostly about creating artificial scarcity in order to support asset prices.” There is nothing artificial about Bitcoin’s scarcity, about its fixed cap. 21 million. Look it up. Again, conflating crypto and Bitcoin, which should be a really elementary concept to grasp.
Store of Value. “Money can be a store of value if its purchasing power does not fluctuate dramatically over short intervals of time.” How is fiat currency doing in that regard? You’re losing gobs of purchasing power every year with inflation raging as high as it is now. And it may be around for quite a while. Worse, look at the long-term: The US Dollar has lost 90% of its purchasing power in the last 100, years. Ditto for the British Pound. Quite the store of value.
Ineffective Inflation Hedge. The report uses a very selective manner to claim that crypto hasn’t provided an effective hedge against inflation. They pick out the period of late-2021 and 2022. I could have picked out a different period, say, 2020 and early 2021, and proven just the opposite. The effort here was so transparent.
Supply Increases? “The supply of cryptocurrency generally increases with the number of verified transactions.” Yes, to a point. Again, that hard cap, fixed supply is a tough point for the White House to grasp. It’s not unlimited money printing like, well, we know.
And here’s our winner, folks:
“Despite Ethereum’s switch to proof-of-stake, Bitcoin has not announced plans to make a similar change.”
Oh my. Where to start?
Did the White House interview the CEO of Bitcoin Corp.?
Did they get a statement from the Bitcoin Board of Directors?
How this statement got in the report is truly astounding. They refuse to believe that Bitcoin is truly decentralized.
And by the way, there’s a reason for employing proof-of-work instead of proof-of-stake. It’s more secure. Period. Not mentioned in the report.
And the Usual FUD
The report continues with the usual fears and doubts concerning crypto, or Bitcoin. “It’s used in illicit transactions.” Even though the vast majority of illicit deeds are done with cash. “Prices are volatile.” Please. Remember the dot com bubble? Tech stocks? Futures contracts? (Bitcoin has recently been less volatile than the NASDAQ stock index.)
And Then the Sales Pitch
The report concludes with a big push to promote more government-controlled financial applications. The Central Bank Digital Currency (CBDC). Like the digital yuan rolled out in China. Still print money at will, and give the government the added capability of watching over all of your finances. And the new payment system being launched by Washington - the FedNow Service. It’s supposed to be a much faster, 24-hour system that will replace the Automated Clearing House. And it may. Again, with the US government being able to see all transactions.
Conclusion: Bitcoin Doesn’t Care
There will be no official response from the Bitcoin Corporation to this report from President Biden’s White House. The Bitcoin network will continue to hum along, processing transactions in a secure, decentralized, efficient manner.
Like Satoshi intended.
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Issue No. 101, March 24, 2023
Rick Mulvey is a CPA, crypto consultant, and frequent contributor to Bitcoin Magazine. He writes about all things Bitcoin, and yells at the Yankees and Giants. He also runs marathons and makes wine, neither professionally.