Written by Dr.Leon Tressell, co-authorted by Rosa Tressell exclusively for SouthFront
In early March the United States Congress issued its annual Joint Economic Report. This annual report is designed to help various Congressional committees and their members as they deal with economics issues. The report included for the first time, a chapter on cryptocurrency that was rather bullish in tone. It should give everyone looking at the future of the global economic system pause for thought.
Every year a joint committee of Congress, made up of 10 Senators and 10 members of the House of Representatives, produces a very detailed economic report. This year they took the unprecedented step of including a 27 page chapter on cryptocurrencies entitled,’Building a Secure Future, One Blockchain at a Time’.
Quick Summary of the 2018 Economic Report of Congress
- Cryptocurrencies and blockchain provide,”technology that could revolutionize the world’s digital landscape and economy.”
- It takes a positive view of ICO’s stating that they offer a cheaper and more efficient alternative to IPO’s.
- The Report regards cryptocurrencies as commodities but concedes they have the potential to become money once they deal with issues such as scalability, ease of use and price stability.
- Cryptocurrencies and blockchain are a ”truly revolutionary” and offer huge benefits to U.S. society from storing medical records to securing critical financial and energy infrastructure.
- It recommends that members of Congress and the public should educate themselves about crypto and blockchain as they have a,”wide range of uses in the future.”
- Government agencies should examine the possible applications of this technology to make government more efficient at delivering its various services.
For a more detailed analysis of the report see below
The introduction to the report notes that America faces potentially huge costs from dealing with the threat of cyber attacks upon its economy and critical infrastructure. Straight way in the first paragraph it comments,”The
Report suggests blockchain as a potential tool for securing
America’s digital infrastructure.”
It goes on to observe that cryptocurrencies and blockchain pose unique challenges to regulators and Congress yet they provide,”technology that could revolutionize the world’s digital landscape and economy.”
The introduction recognises the emergence of cryptocurrencies in 2017 as one of the most significant economic events of the year. The following charts from the Report help illustrate this.
The introduction compares the emergence of cryptocurrencies into the mainstream in 2017 with that of internet companies in the 1990s:
”The buzz surrounding digital currencies resembles the internet excitement in the late 1990s when people recognized technology companies could change the world. Many internet companies launched and their valuations took off in short order. Many failed, but a few succeeded spectacularly and challenged the conventional ways of doing business.”
The Report spends some time explaining what cryptocurrencies/blockchains are and then discusses their growing pains over the last few years. It then moves on to look at various regulatory issues regarding the crypto space.
In the section on regulatory issues the Report advocates a cautious approach. The members of Congress who drew up the report are keen to to avoid,”overly prescriptive regulations that constrain this emerging technology from reaching its full potential.”
It will come as a surprise to many that the report takes a rather favourable view of ICO’s. The Report notes the explosive growth of this new way of raising capital for projects using this new technology.
The Report points out that ICO’s are a much more efficient way of building a new economic system as they are much less expensive than an Initial Public Offering. Apparently, PriceWaterhouseCooper has estimated that the average IPO costs companies up to 7% of the capital raised and costs over $4 million in accountancy costs.
On top of this, companies have to spend between $1-2 million annually to maintain their status as a publicly listed entity. In contrast, the average ICO cost around $60,000 and return a hefty profit to initial investors. The reports notes that ICO’s raised $5.3 billion during 2017 for companies that offered a wide variety of ideas and projects. It takes a rather upbeat view of these new companies launched by the ICO boom of 2017:
”Many of these projects will likely fail, as most start-ups do, but the ones that do survive could transform the way the internet and technology works for decades to come.”
Are cryptocurrencies money?
Not surprisingly, the report dismisses the idea that cryptocurrencies are money. After all, only central banks are allowed to print currencies which is a key source of their power. It cites scalability issues and extreme price volatility as key barriers to crypto being accepted as a legitimate form of currency.
Having said this, the Report does concede that:
”If digital currencies become less volatile in the future, valuing items in those denominations could become easier and individuals might begin using them more frequently as a medium of exchange.”
Future of Cryptocurrencies
The report offers several rather interesting insights into the future of cryptocurrencies. The volatility in the prices of different cryptos does not stem from the variability of their supply, for example in Venezuela government money printing has led to hyperinflation, rather from public demand for them. If cryptocurrencies are to maintain their value then they must offer benefits such as ease of use, accessibility, privacy, security, scalability and low transactions costs relative to fiat currency and other stores of value such as gold.
This section of the Report concludes by observing that:
”cryptocurrencies resemble real assets or commodities more than currencies, though their future role could expand to include functioning as mediums of exchange.”
The most interesting section of the Congressional Economics Report comes in that section dealing with crypto/blockchain innovations. It starts off by recognising that media FUD over crypto has scared many people away from realising the benefits of crypto applications beyond the financial sphere. Cryptocurrencies offer a decentralized, secure and efficient way to store any kind of date across multiple platforms.
The example is given of how several health companies together with the Department of Health are researching blockchains as an efficient way of storing medical records. It describes how cryptocurrencies are making a very valuable contribution to the healthcare system:
”The new products range from coordinating payment (healthnexus),430 monitoring and rewarding patients for following clinical recommendations (RoboMed Network),431 tracking pharmaceuticals along the supply chain (MediLedger),432 and even identifying specific supply chain problems such as those associated with the opioid crisis (BlockMedx).”
The Report waxes lyrical about the, ”truly revolutionary potential” of blockchain technology from managing supply chains and the electrical grid to tracking/verifying products in the global shipping industry.
Conclusion and Recommendations to Congress
In the overall conclusion, to the chapter on crypto and blockchain the report notes that they offer huge potential benefits from securely storing medical records to securing critical financial and energy infrastructure. The Report makes a number of positive recommendations to Congress.
These recommendations make it clear that the most powerful country on the planet is not seeking to destroy the crypto ecosystem. Forget the ill-informed fear, uncertainty and doubt from the mainstream media and ignorant politicians.
Do not forget that decisions taken by the U.S. Congress often have global significance and implications for governments and ordinary people everywhere. Love them or hate them cryptocurrencies are here to stay. They will come to play an increasingly important part of the global econom system.
The key recommendations are quoted in full below:
”Policymakers and the public should become more familiar with digital currencies and other uses of blockchain technology, which have a wide range of applications in the future.”
”Policymakers, regulators, and entrepreneurs should continue to work together to ensure developers can deploy these new blockchain technologies quickly and in a manner that protects Americans from fraud, theft, and abuse, while ensuring compliance with relevant regulations.”
”Government agencies at all levels should consider and examine new uses for this technology that could make the government more efficient in performing its functions.”