US Govt Attacks Bitcoin In New Report, Promotes A CBDC
US President Joe Biden released the government’s economic report on Monday, in which Bitcoin plays an important role. BTC is mentioned 75 times in the report, which attempts to denigrate Bitcoin and promote a United States Central Bank Digital Currency (CBDC) as the best solution.
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 of the 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 US 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 (versus the US dollar) increased by more than 1,000% from March 2019 to March 2021 and then decreased by more than 70% from November 2021 to October 2022. This volatility means that anyone Anyone using Bitcoins to store their savings is subject to high volatility risks in their purchasing power.
For Bitcoiners, the allegations must be more than flimsy, given the massive devaluation of the USD against Bitcoin, record high inflation, US banking crisis, bank bailouts, among others. “What the White House cannot say, of course, is that Bitcoin’s value lies in protecting it from its abuses of authority, monetary or otherwise,” Troy Cross he wrote in response to the report.
As you would expect, the White House also attacks Bitcoin mining as an energy-consuming 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 avoided, while the report alleges more environmental damage, such as noise, air and water pollution.
“Not all crypto mining operations consume the same amount of energy. […] Despite Ethereum’s shift to proof-of-stake, Bitcoin has not announced plans to make a similar shift,” the report continues.
Dennis Porter, founder of SatoshiAct, which champions the positive effects of BTC mining, wrote in dismay that it is becoming clear that the voices of reason about 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 move” to proof-of-stake. pic.twitter.com/97sKw6DKWa
—Dennis Porter (@Dennis_Porter_) March 21, 2023
CBDC is the Best Bitcoin, According to the White House
In stark contrast, the report states that a Central Bank Digital Currency (CBDC) represents the possibility of introducing a digital form of money. “By operating under the oversight of a trusted authority, these two mechanisms have the potential to realize many of the benefits that cryptocurrency developers have promised,” states the report and further explains:
A possible US CBDC could also help support other policy goals. For example, a potential US CBDC could help ensure that such payment systems are in line with principles of human rights, democratic values and privacy.
Dave Birnbaum, Chief Product Officer at Coinbits has a strong words for the report. In a Twitter thread, he writes that the report’s arguments epitomize the banking panic of 1907, when private bankers pooled their resources to save the system.
“This is cited as a lesson that the government should have that power, so they created the Fed to exercise it in place of private citizens,” says Birnbaum, who goes on to argue that the section on cryptocurrencies can be understood as a “microaggression , suggesting that those who think digital assets are attractive are part of something like a Marxist false consciousness.”
Mike Novogratz, CEO of Galaxy Digital, responded in a tweet:
Maybe they should refund me all the taxes I paid for the last 10 years on my cryptocurrency trading. They are wrong! $BTC is a newsletter about managing the economy. And its rise is telling us something.
At press time, the price of BTC was sitting at $28,103, driven by the US banking crisis and renewed monetary stimulus from the Federal Reserve.
iStock Featured Image, TradingView chart