The True Legacy of Biden-Era Crypto Policy: Regulation Through Hostility

The claim by former Biden economic advisers that the decline in bitcoin's price is a vindication of their administration's crypto policy has been labeled as a masterclass in selective memory. Their op-ed in the New York Times conveniently glosses over the most critical aspect of Biden-era crypto policy: the lack of a clear regulatory framework. Instead, the administration employed a strategy of regulation-by-enforcement, which had a devastating effect on legitimate businesses and consumers. The authors' attempt to credit the Biden administration with aggressive regulatory efforts to curb scams and fraud is extraordinary, given the rise of FTX during their tenure. The exchange's founder, Sam Bankman-Fried, was a prominent Democratic donor who met with senior administration officials while running a massive financial fraud. The administration's approach had a perverse effect: compliant companies were driven out of business or offshore, while bad actors thrived in the confusion. The authors also ignore the troubling episode of 'Operation Choke Point 2.0,' where banks systematically debanked lawful crypto businesses under pressure from federal regulators, cutting them off from the financial system without due process. The Biden administration's crypto policy was marked by a lack of clear rules, which ultimately harmed consumers and stifled American innovation. The authors' dismissal of crypto as a 'painfully slow and expensive database' with 'almost no practical use' is also misleading. They acknowledge that crypto is used for international wire transfers but downplay its significance, despite the fact that stablecoins can execute these transfers at a fraction of the cost of traditional methods. This has a material impact on migrant workers and their families, who are charged exorbitant fees for cross-border remittances. The Biden economists' claim that no major tech firms are using blockchain technology is also incorrect, as numerous giants like Fidelity, JPMorgan, and Visa are actively building on blockchain infrastructure. The op-ed's focus on bitcoin's price decline as a measure of the asset class's worth is analytically unserious, as volatility is a natural feature of nascent markets. The authors' labeling of the Bitcoin network as 'slow' is also misguided, as it prioritizes security over speed. The network's security features make it an attractive option for users in areas where governments target citizens. The authors' invocation of the straw man of a taxpayer-funded bailout of the crypto industry is also misleading, as no serious policymaker has proposed such a measure. The stablecoin legislation they reference creates fully reserved payment instruments that are overcollateralized with liquid government bonds. The Biden administration's decision to guarantee all deposits after the collapse of Silicon Valley Bank in 2023 also raises questions about their concern for moral hazard. The op-ed's implication that the crypto industry's political donations are corrupt is also problematic, as it would indict virtually every sector of the American economy. The crypto industry's advocacy for favorable regulation through political participation is a cornerstone of American democracy. The Biden administration had a historic opportunity to establish the United States as a 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 US crypto ecosystem.