The report includes a section named ‘The Perceived Appeal of Crypto Assets,’ which describes how Bitcoin works but ultimately concludes that the cryptocurrency cannot be categorised as money because it fails to fulfil two out of three characteristics of money.
Firstly, the report emphasises 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. The White House also compared BTC to the US dollar as a medium of exchange and concluded that Bitcoin is not as effective. Due to its volatility, the report also denies that BTC could be a store of value.
As far as Bitcoin mining is concerned, the White House cites a 2022 study from the University of Cambridge, which claimed that Bitcoin mining consumed more energy in 2021 than several entire countries, including Chile, Belgium, and Finland. They also compared Bitcoin to Ethereum, which made the switch from a proof-of-work consensus to proof-of-stake in September 2022.
When it comes to the possibility of introducing a digital form of money, the report takes a closer look at Central Bank Digital Currencies (CBDC), especially in the context of operating under the supervision of a trusted authority. One of the potential benefits of a US CDBC would be to support other policy goals. For instance, a US CBDC could help ensure that such payment systems are in line with the principles of human rights, privacy, and democratic values.
According to the report, a CBDC system can be set up in a few different ways, such as a wholesale CBDC, which offers access only to financial institutions such as banks, and a retail CBDC which allows for access by individuals. As of January 5, 2023, 11 countries have launched CBDCs while the European Central Bank and the Bank of Japan are currently exploring such systems.
While some countries have considered using DLT for their CBDC, many of the pilot programs for CBDC systems are not built on DLT. They instead rely on a trusted central authority, namely a country’s central bank, to operate key aspects of the CBDC system. The White House believes that this is likely to be the case if a US CBDC is introduced.
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