The Real Legacy of Biden's Crypto Policy: Regulation Through Hostility

The decline in bitcoin's price is being touted by former Biden economic advisers as a vindication of their administration's crypto policy. However, this claim is based on a selective memory that glosses over the harm caused by the administration's approach. The authors of a recent New York Times op-ed credit the Biden administration with taking an aggressive regulatory stance against scams and fraud, but this framing ignores the fact that the administration's strategy of regulation-by-enforcement had a perverse effect. Legitimate companies were driven out of business, consumers were harmed, and innovation was stifled, while bad actors like Sam Bankman-Fried thrived in the confusion. The administration's failure to establish clear rules allowed those who never intended to follow them to benefit. The op-ed also ignores the troubling episode of 'Operation Choke Point 2.0,' in which banks systematically debanked lawful crypto businesses under pressure from federal regulators, cutting them off from the financial system without due process. The authors dismiss crypto as having 'almost no practical use,' but this claim is not supported by the facts. Crypto is used for fast and low-cost cross-border remittances, which is a significant achievement that benefits millions of people. The Biden economists' claim that no major tech firms are using blockchain technology is also incorrect, as many prominent companies are actively building on blockchain infrastructure. The op-ed's use of short-term price movements to condemn the entire asset class is analytically unserious, and its labeling of the Bitcoin network as 'slow' ignores its security benefits. 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 thing. The stablecoin legislation referenced in the op-ed creates fully reserved payment instruments that are overcollateralized with liquid government bonds, and the Trump administration's bitcoin reserve proposal involves no new taxpayer expenditure. The Biden administration's decision to guarantee all deposits when Silicon Valley Bank collapsed in 2023 raises questions about its selective 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 global leader in digital asset regulation but chose instead to weaponize the banking system against a legal industry, creating a lose-lose-lose for innovation, consumer protection, and the U.S. crypto ecosystem.