The Real Consequences of Biden-Era Crypto Policy: Regulation Through Hostility

Former economic advisers to the Biden administration, 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 omission of key facts. The authors claim that the Biden administration's 'aggressive regulatory efforts' have been effective in curbing scams and fraud, but this assertion is misleading. In reality, the administration's approach to regulation has been marked by hostility, with a focus on enforcement rather than establishing clear rules. This has had a perverse effect, driving legitimate businesses offshore or out of business, harming consumers, and stifling American innovation. Meanwhile, bad actors have thrived in the confusion. The authors conveniently ignore the 'Operation Choke Point 2.0' episode, in which 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 approach has also cut consumers off from tools they were using to participate in the financial system, without putting a single policy through the democratic process. The authors dismiss crypto as a 'painfully slow and expensive database' with 'almost no practical use', but this assessment is flawed. Crypto is used for fast, low-cost cross-border remittances, which is a significant achievement, especially for migrant workers and their families. Moreover, blockchain technology underpins a rapidly growing ecosystem of financial applications, with major firms like Fidelity, JPMorgan, and Visa actively building on blockchain infrastructure. The op-ed's criticism of bitcoin's price decline is also analytically unserious, as short-term price movements do not condemn an entire asset class. The authors' labeling of the Bitcoin network as 'slow' is also misleading, as it prioritizes security over speed. The op-ed's invocation of the straw man of a taxpayer-funded bailout of the crypto industry is unfounded, and the stablecoin legislation referenced creates fully reserved payment instruments that are overcollateralized with government bonds. The Biden administration's concern about moral hazard is selective, as it authorized extraordinary measures to guarantee all deposits when Silicon Valley Bank collapsed. 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, denied a fair hearing by regulators. The Biden administration had a historic opportunity to establish the United States as a global leader in digital asset regulation, but it 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.