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

The claim by former Biden economic advisers Ryan Cummings and Jared Bernstein that the decline in bitcoin's price vindicates the administration's crypto policy is a selective interpretation of history. Their op-ed in The New York Times omits the most significant fact about Biden-era crypto policy: it was characterized by a lack of clear regulations. The authors praise the administration's 'aggressive regulatory efforts to curb scams and fraud,' yet this assertion is misleading given the events that unfolded during their tenure. The rise of FTX, which became one of the largest financial frauds in history, occurred under the Biden administration's watch. Sam Bankman-Fried, the founder of FTX, was a major Democratic donor and had meetings with senior administration officials, including then-SEC Chair Gary Gensler. The administration's strategy of regulation through enforcement, rather than establishing clear rules, had a detrimental effect: legitimate businesses were forced offshore or out of business, consumers were harmed, and American innovation was stifled. Meanwhile, bad actors like Bankman-Fried thrived in the confusion. The absence of clear rules benefited those who never intended to follow them. The authors conveniently ignore 'Operation Choke Point 2.0,' where banks, under pressure from federal regulators, systematically debanked lawful crypto businesses without due process or legislative authority. This campaign affected not only businesses but also ordinary individuals who had turned to crypto due to the traditional banking system's shortcomings. The Biden administration's approach cut consumers off from financial tools without following the democratic process of notice-and-comment rulemaking. Cummings and Bernstein dismiss crypto as a 'slow and expensive database' with 'almost no practical use.' However, they acknowledge its use in international money transfers, which they wave away as a trivial achievement. This is not trivial; global remittance fees average nearly 6.5%, costing migrant workers and their families billions each year. Stablecoins on blockchain networks can execute these transfers in minutes for a fraction of the cost, providing a significant financial improvement for families in developing countries. The Biden economists seem unimpressed, possibly because they did not speak to the people these tools serve. Beyond remittances, blockchain technology supports a growing ecosystem of financial applications. Major firms like Fidelity, JPMorgan, and BlackRock are actively building on blockchain infrastructure, contradicting the claim that no 'giant tech firms' use this technology. The op-ed uses bitcoin's price decline as its news hook, condemning the entire asset class based on short-term price movements, which is analytically flawed. The Bitcoin network may be slow but makes up for it in security, a quality crucial for regulators. Transactions cannot be vetoed or reversed by outsiders, and user funds cannot be unilaterally confiscated. This is why it's used globally, especially in areas where citizens are targeted by their governments. Other blockchains enable fast payments. The authors invoke the straw man of a taxpayer-funded bailout of the crypto industry, a proposal no serious policymaker or crypto participant has made. The stablecoin legislation they reference involves fully reserved payment instruments overcollateralized with liquid government bonds, and the Trump administration's bitcoin reserve proposal does not involve new taxpayer expenditure. In contrast, when Silicon Valley Bank collapsed, the Biden administration guaranteed all deposits, showing selective concern about moral hazard. The op-ed implies corruption due to crypto industry political donations, a suggestion that would implicate virtually every sector of the American economy. Denied a fair hearing by regulators, the crypto industry turned to political participation as a last resort, a cornerstone of American democracy. If political spending is problematic, the authors should examine their own side, given Bankman-Fried's significant donations to Democrats during the Biden Administration. The Biden administration had the opportunity to establish the United States as the global leader in digital asset regulation by creating clear, fair rules that would protect consumers and allow innovation to flourish. Instead, it chose to weaponize the banking system against a legal industry, resulting in a lose-lose-lose for innovation, consumer protection, and the U.S. crypto ecosystem. Cummings and Bernstein claim 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.