The Dark Legacy of Biden's Crypto Policy: Regulation Through 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 labeled as a selective memory. Their opinion piece in the New York Times conveniently omits the most critical aspect of Biden-era crypto policy: it was not based on a well-reasoned regulatory framework. The authors praise the administration's aggressive regulatory efforts to curb scams and fraud, but this assessment is surprising given the events that unfolded during their tenure. The massive growth of FTX, which eventually became one of the largest financial frauds in history, occurred under the Biden administration. Sam Bankman-Fried, the mastermind behind FTX, was a significant Democratic donor and had meetings with senior administration officials, including then-SEC Chair Gary Gensler, while running his fraudulent operation. The administration's strategy of regulation-by-enforcement rather than establishing clear rules had a detrimental effect: legitimate companies were forced offshore or out of business, consumers were harmed, and American innovation was stifled. Meanwhile, malicious actors like Bankman-Fried, who knew how to navigate the political landscape, thrived in the confusion. The absence of clear rules benefited those who never intended to follow them. The authors also ignore one of the most disturbing episodes of the Biden era: 'Operation Choke Point 2.0.' Under pressure from federal regulators, banks systematically debanked lawful crypto businesses, cutting them off from the financial system without due process, formal rulemaking, or legislative authority. This debanking campaign affected not only businesses but also ordinary individuals and small businesses that had turned to crypto due to the traditional banking system's long-standing underservice. The Biden administration's approach disconnected consumers from tools they used 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.' They acknowledge that crypto is used for international money transfers but downplay the significance of enabling fast, low-cost cross-border remittances for millions of people. However, this is not a trivial achievement. Global remittance fees average nearly 6.5%, costing migrant workers and their families billions of dollars each year. Stablecoins on blockchain networks can execute the same transfers in minutes for a fraction of the cost, providing an immediate, material financial improvement for families in developing countries. The Biden economists seem unimpressed despite attending 'dozens of meetings.' One wonders if they spoke to any of the people these tools serve. Beyond remittances, blockchain technology underpins a rapidly growing ecosystem of financial applications. Major companies like Fidelity, JPMorgan, BlackRock, BNY Mellon, Morgan Stanley, Visa, Mastercard, Meta, Stripe, Block Inc., and Franklin Templeton are actively building on blockchain infrastructure. The claim by the Biden economists that no 'giant tech firms' are using this technology is incorrect. The op-ed uses bitcoin's price decline as its news hook. However, using short-term price movements to condemn an entire asset class is analytically flawed. Amazon's stock fell 94 percent from its peak during the dotcom bust, but by the Cummings-Bernstein standard, it should have been written off as 'fundamentally worthless.' Volatility is a characteristic of nascent markets, not proof of worthlessness. Moreover, labeling the Bitcoin network as 'slow' overlooks its security, a quality that should be of utmost importance to regulators. The Bitcoin network cannot be vetoed or reversed by outsiders or intermediaries, and its distributed ledger cannot be tampered with. This is why it's used worldwide in areas where regular citizens are targeted by their governments. Other blockchains enable payments at high speeds. The authors repeatedly invoke the straw man of a taxpayer-funded bailout of the crypto industry, a proposal that no serious policymaker or crypto participant has made. The stablecoin legislation they reference creates fully reserved payment instruments that are overcollateralized with the most liquid government bonds. The Trump administration's bitcoin reserve proposal involves no new taxpayer expenditure. Meanwhile, when Silicon Valley Bank collapsed in 2023, the Biden administration authorized extraordinary measures to guarantee all deposits, seemingly selectively concerned about moral hazard. The op-ed devotes considerable space to crypto industry political donations, implying corruption. However, the suggestion that an industry advocating for favorable regulation through political participation is inherently corrupt would implicate virtually every sector of the American economy. Denied a fair hearing by regulators, 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 predominantly gave to Democrats. The Biden administration had a historic opportunity to establish the United States as the global leader in digital asset regulation by writing clear, fair rules that would protect consumers while allowing innovation to flourish on American soil. Instead, it 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. Cummings and Bernstein claim that crypto's boosters 'have run out of excuses.' On the contrary, it is the Biden administration's crypto critics who owe the public an explanation.