The Unintended Consequences of Biden's Crypto Policy: A Legacy of Hostility

The claim by former Biden economic advisors Ryan Cummings and Jared Bernstein that the decline in bitcoin's price is a vindication of the administration's crypto policy has been met with criticism. Their opinion piece in The New York Times has been accused of being a masterclass in selective memory, as it glosses over the most significant fact about Biden-era crypto policy: it lacked a reasoned regulatory framework. The authors' assertion that the Biden administration's 'aggressive regulatory efforts' were successful in curbing scams and fraud is disputed, given the massive scale of FTX during the Biden administration and the fact that its founder, Sam Bankman-Fried, was a top Democratic donor who met with senior administration officials while running a massive financial fraud. The administration's strategy of regulation-by-enforcement, rather than establishing clear rules, had a devastating effect: legitimate businesses were driven offshore or out of business, consumers were harmed, and American innovation was stifled. Meanwhile, bad actors like Bankman-Fried thrived in the confusion. The authors conveniently ignore one of the most troubling episodes of the Biden era: 'Operation Choke Point 2.0,' where banks systematically debanked lawful crypto businesses, cutting them off from the financial system without due process. The debanking campaign had a disproportionate impact on ordinary individuals and small businesses who had turned to crypto due to the traditional banking system's long history of underserving them. The Biden administration's approach cut consumers off from tools they were using to participate in the financial system, without putting a single policy through the democratic process of notice-and-comment rulemaking. The authors dismiss crypto as a 'painfully slow and expensive database' with 'almost no practical use,' but this assessment is disputed. Crypto is used to wire money internationally, enabling fast, low-cost cross-border remittances for millions of people. Stablecoins running on blockchain networks can execute the same transfers in minutes for a fraction of the cost, resulting in an immediate, material financial improvement for families in developing countries. The Biden economists' claim that no 'giant tech firms' are using blockchain technology is incorrect, as numerous major companies, including Fidelity, JPMorgan, and BlackRock, are actively building on blockchain infrastructure. The op-ed's news hook is bitcoin's price decline, but using short-term price movements to condemn an entire asset class is analytically flawed. The authors' labeling of the Bitcoin network as 'slow' is also disputed, as it prioritizes security - a quality that should be of utmost importance to regulators. The authors repeatedly invoke the straw man of a taxpayer-funded bailout of the crypto industry, but no serious policymaker has proposed such a thing. The stablecoin legislation referenced creates fully reserved payment instruments that are overcollateralized with liquid government bonds. The Trump administration's bitcoin reserve proposal involves no new taxpayer expenditure. The Biden administration's concern about moral hazard was seemingly highly selective, as it authorized extraordinary measures to guarantee all deposits when Silicon Valley Bank collapsed in 2023. The op-ed implies corruption due to crypto industry political donations, but this suggestion would indict virtually every sector of the American economy. The crypto industry turned to the political process as a last resort, a cornerstone of American democracy. If political spending is problematic, the authors might start by examining their own side of the aisle during the Biden Administration, when Bankman-Fried overwhelmingly gave to Democrats. The Biden administration had a historic opportunity to establish the United States as the global leader in digital asset regulation but chose to weaponize the banking system against a legal industry, creating a lose-lose-lose for innovation, consumer protection, and the U.S. crypto ecosystem.