The True Legacy of Biden's Crypto Policy: Regulation Through Hostility

Two former economic advisers to President Biden, Ryan Cummings and Jared Bernstein, have penned an opinion piece for The New York Times, arguing that the decline in bitcoin's price is a vindication of the administration's crypto policy. However, their argument relies on selective memory and omits crucial facts. The authors claim that the Biden administration's 'aggressive regulatory efforts' curbed scams and fraud, but this narrative glosses over the administration's actual strategy of 'regulation-by-enforcement,' which had a disastrous impact on the industry. By failing to establish clear rules, the administration created an environment in which legitimate businesses were driven out, consumers were harmed, and innovation was stifled. Meanwhile, bad actors like Sam Bankman-Fried, who was a major Democratic donor, thrived in the regulatory confusion. The administration's approach also led to 'Operation Choke Point 2.0,' in which banks systematically debanked lawful crypto businesses, cutting them off from the financial system without due process. The authors also dismiss the practical uses of crypto, including fast and low-cost cross-border remittances, which have improved the lives of millions of people. They claim that no major tech firms are using blockchain technology, but this is flatly incorrect. The op-ed's criticism of bitcoin's price volatility is also misguided, as it is a feature of nascent markets. Furthermore, the authors' labeling of the Bitcoin network as 'slow' ignores its security benefits, which are essential for regulators. The authors' invocation of a taxpayer-funded bailout of the crypto industry is a straw man, as no serious policymaker has proposed such a thing. The stablecoin legislation they reference creates fully reserved payment instruments that are overcollateralized with liquid government bonds. The Trump administration's bitcoin reserve proposal also involves no new taxpayer expenditure. The Biden administration's concern about moral hazard is selective, as it authorized extraordinary measures to guarantee all deposits when Silicon Valley Bank collapsed in 2023. The op-ed's focus on crypto industry political donations implies corruption, but this is a cornerstone of American democracy. The crypto industry turned to the political process as a last resort after being denied a fair hearing by regulators. If political spending is problematic, the authors should examine their own side of the aisle, as Bankman-Fried overwhelmingly donated to Democrats. The Biden administration had the opportunity to establish the United States as a global leader in digital asset regulation but instead chose to weaponize the banking system against a legal industry, creating a lose-lose-lose situation for innovation, consumer protection, and the U.S. crypto ecosystem.