White House Report Calls For Greater Oversight of Web3

The White House’s 2023 Economic Report of the President includes a damning overview of web3 and calls for greater regulation of the sector.

The report, which was compiled by the U.S. Council of Economic Advisors and published on Monday, slams cryptocurrencies as an ineffective means of payment and store of value. It claims the primary utility of digital assets is cultivating artificial scarcity to drive price volatility, and calls for greater regulatory oversight of the sector.

Kristen Smith, the CEO of Blockchain Association, a non-profit organization promoting pro-innovation regulations for the digital asset economy, described the report as “disappointing.”

“While other countries are increasingly receptive to the burgeoning crypto industry, some in government appear increasingly allergic to its promise, sending companies and innovators offshore,” Smith said.

The report comes as critics accuse the U.S. government of orchestrating a targeted attack on the crypto industry, pointing to the recent regulatory takeovers of banking institutions working with crypto firms, the SEC’s sustained efforts to regulate the sector through enforcement actions, and pending legislation from the Biden administration.

Notably, the White House excluded central bank digital currencies (CBDCs) and nonfungible tokens (NFTs) from its definition of crypto assets.

Cryptocurrency proponents are described as “aspiring to create a decentralized financial system without relying on government and their regulatory frameworks.”

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The Defiant

The report goes on to say that web3 advocates espouse that crypto assets offer decentralized monetary functions, could increase financial inclusion among unbanked or underbanked communities, improve existing payment systems (especially cross-border settlement), and could act as a store of value or hedge against inflation.

“So far, crypto assets have brought none of these benefits,” the authors conclude.

The White House added that the financial regulations crypto seeks to bypass were shaped by the lessons learned from past financial crises.

“[Cryptocurrency] proponents are relearning the lessons from previous financial crises the hard way,” the report says, referring to the high-profile CeFi implosions that rocked the industry in 2022.

Despite largely attacking web3 and distributed ledger technologies, the report concedes that corporate and government experiments with DLT could yield many of the benefits associated with the technology. The Biden administration published a document outlining policy objectives for a U.S. CBDC last year.