It’s increasingly looking like the fed is trying to put the crypto sector to bed.
This, as a new report authored by the White House Council of Economic Advisers, devotes an entire 35-page chapter to explaining why use cases of blockchain-based digital assets have not fulfilled their promises, outlining in broad strokes the various risks they present to both consumers and the U.S. financial system.
The picture painted is dim, and industry observers believe it may signal a shift in the Biden administration’s approach to the crypto sector from neutral to negative.
“Crypto assets to date do not appear to offer investments with any fundamental value, nor do they act as an effective alternative to fiat money, improve financial inclusion, or make payments more efficient; 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,” the White House report stated.
Read More: Things Are Getting Real, but Not Real Good, for Crypto
“One of the principal areas where there is mass noncompliance is disclosure surrounding crypto assets that are securities,” the White House alleged. “This lack of disclosure prevents investors from recognizing that most crypto assets have no fundamental value.”
As reported by PYMNTS, Coinbase on Wednesday (March 22) received a Wells notice from the U.S. Securities and Exchange Commission (SEC) related to Coinbase’s listing of potential unregistered securities across its suite of digital asset products and services.
It is the second Wells notice issued to a U.S. crypto firm this year, with the SEC also targeting Paxos Trust last month.
Both Coinbase and Paxos subsequently ended certain crypto products under investigation — with Paxos ceasing issuance of the Binance-branded BUSD stablecoins and Coinbase retiring at least one of its staking rewards products.
“Much of the activity in the crypto asset space is covered by existing regulations and regulators are expanding their capabilities to bring a large number of new entities under compliance,” the White House paper stated, but what observers have honed in on is that both Coinbase and Paxos are already regulated by government agencies.
Coinbase is a publicly traded company, meaning the SEC reviewed and approved its crypto business before its initial public offering (IPO). Coinbase CEO Brian Armstrong has repeatedly insisted that Coinbase’s products are not securities and that its operations do not violate any securities laws.
“The SEC simply has not been fair, reasonable or even demonstrated a seriousness of purpose when it comes to its engagement on digital assets,” Armstrong tweeted in response to the Wells notice.
For its part, Paxos Trust was among the first companies approved and regulated to offer crypto products and services in the U.S., doing business as a New York State-chartered trust company regulated by the New York State Department of Financial Services (NYDFS). It is one of the most comprehensively regulated crypto platforms globally.
That two of the U.S.’s most comparatively well-heeled firms are facing growing SEC scrutiny does not bode well for other crypto businesses hoping to operate compliantly in the U.S.
In the last decade, payments in cash and checks have declined dramatically while digital payments have notably increased, and the crypto sector was able to leverage this ongoing transformation of the landscape to win global market share.
The White House report takes the view that despite leveraging the emergent environment, crypto has so far failed to provide any real value within it.
“The growth of crypto assets has revealed a demand for a faster and more inclusive financial system with a real-time payment system and circulating digital money … This vision has not been realized,” the paper reads.
Rather, the U.S. government believes the Federal Reserve’s upcoming FedNow real-time rail will step in to make good on crypto’s failed promises, saying that “the benefits of circulating digital money after FedNow is launched may be minimal.”
The paper adds that FedNow, which launches this July, could “help bring the U.S. financial infrastructure into the digital era in a clear and simple way.”
As US-based crypto firms increasingly look to establish operations abroad, the future of the digital asset industry in America looks increasingly clouded.
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