US President’s Economic Report 2023: Chapter 8 Discussion on Digital Assets

According to reports, in 2023, the US President’s Economic Report was released, with a total of 9 chapters. Chapter 8, “Digital Assets: Learning Economic Principles Again,” first introduces the potential advantages of cryptocurrencies, including improving payment systems, enhancing financial inclusiveness, and creating a mechanism for allocating intellectual property and financial value; Subsequently, it was pointed out that crypto assets did not bring any relevant benefits, pointing out that crypto assets are mainly speculative investment tools, cryptocurrencies generally cannot effectively play all the functions of currencies like sovereign currencies (such as the United States dollar), stable currencies may be affected by operational risks, crypto assets may cause losses to consumers and investors, and the economic benefits of distributed ledger technology (DLT) are limited Financial innovation risks, as well as other risks such as leverage risks, price fluctuations, illegal financial risks, and the use of extortion software. In addition, this chapter also discusses the upcoming improvements to US payments and the introduction of CBDC. The chapter concludes that “crypto assets are too risky to serve as payment instruments or expand financial inclusion, and they appear to continue to exist, posing risks to financial markets, investors, and consumers.”.

2023 US Presidential Economic Report: Cryptographic assets are too risky to be used as a payment tool or to expand financial inclusion

Introduction

The US President’s Economic Report of 2023, which comprises 9 chapters, shed light on the potential of cryptocurrencies and the risks associated with them. The report claims that crypto assets have the potential to enhance payment systems, financial inclusiveness, and intellectual property allocation while pointing out their shortcomings.

Chapter 8: Digital assets, learning Economic Principles again

Chapter 8 of the report targeted digital assets and their potential economic benefits. It initially highlighted the advantages of crypto assets and their role in improving payment systems, enhancing financial inclusiveness, and creating a mechanism for allocating intellectual property and financial value. It is worth noting that digital currencies are not enforced by the government, and they operate in a decentralized manner, making their use popular for many people.

However, the report also pointed out the downside of these assets, indicating that they are primarily speculative investment tools. Unlike sovereign currencies such as the United States dollar, cryptocurrencies cannot effectively execute all the functions that a currency can perform. Moreover, stable currencies may be affected by operational risks, while crypto assets may expose consumers and investors to possible losses.

Shortcomings of Digital Assets

The US President’s Economic Report analyzed the potential economic risks associated with digital assets. These risks include financial innovation risks, leverage risks, price fluctuations, and illegal financial risks. One other risk associated with cryptocurrencies is the use of extortion software, which has increasingly become popular among cybercriminals.

Future Improvements

The report also delves into the direction of US payments and the introduction of Central Bank Digital Currency (CBDC). CBDC is still under discussion among different stakeholders, and no significant steps have been taken to launch these currencies. However, the potential of CBDCs is significant and could help overturn the role of traditional currencies over time.

Conclusion

Chapter 8 of the US President’s Economic Report 2023 has extensively tackled the advantages and shortcomings of digital assets, including cryptocurrencies. Highlighting the potential risks of these assets, the report concludes that digital assets are too risky to serve as payment instruments or expand financial inclusion. Despite the drawbacks, digital currencies seem to have captured the attention of many, leading to their continued existence, posing risks to financial markets, investors, and consumers.

FAQs

1. What are the risks associated with cryptocurrencies?
Ans: Risks associated with cryptocurrencies are financial innovation risks, leverage risks, price fluctuations, illegal financial risks, and the use of extortion software.
2. What are the potential advantages of digital assets?
Ans: Digital assets have the potential to enhance payment systems, financial inclusiveness, and intellectual property allocation.
3. Will the introduction of CBDC affect traditional currencies?
Ans: CBDC has the potential to overturn the role of traditional currencies over time.