The True Legacy of Biden's Crypto Policy: Regulation through Hostility

Former Biden economic advisors 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 crucial facts. The authors claim that the Biden administration's 'aggressive regulatory efforts' curbed scams and fraud, but this narrative is misleading. During the Biden administration, FTX, a company run by notorious fraudster Sam Bankman-Fried, was allowed to grow exponentially, despite Bankman-Fried's ties to senior administration officials. The administration's strategy of 'regulation-by-enforcement' rather than establishing clear rules had a detrimental effect: legitimate companies were driven out of business or offshore, consumers were harmed, and innovation was stifled. Meanwhile, rogue actors like Bankman-Fried thrived in the confusion. The authors conveniently ignore the 'Operation Choke Point 2.0' episode, 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 severed consumers' access to financial tools without undergoing democratic processes. Cummings and Bernstein downplay crypto's practical uses, dismissing it as a 'painfully slow and expensive database' with limited applications. However, they acknowledge that crypto is used for international money transfers, albeit briefly, and wave it off as an insignificant achievement. In reality, crypto enables fast and low-cost cross-border remittances, which is a significant improvement for millions of people, particularly migrant workers and their families. The Biden economists seem unimpressed by this development, despite its potential to save billions of dollars in global remittance fees. Beyond remittances, blockchain technology is being utilized by a growing ecosystem of financial applications, with major companies like Fidelity, JPMorgan, and Visa actively building on blockchain infrastructure. The authors' claim that no significant tech firms are using this technology is incorrect. The op-ed's focus on bitcoin's price decline as a means to condemn the entire asset class is analytically flawed. Using short-term price movements to determine an asset's worth is not a serious approach, as evident from the example of Amazon's stock price during the dot-com bust. The Bitcoin network's security, which is its strongest feature, is often overlooked in favor of criticizing its speed. However, security is a vital aspect, especially for regulators, as it ensures that transactions are tamper-proof and user funds are protected. The authors repeatedly invoke the straw man of a taxpayer-funded bailout of the crypto industry, which is not a proposal from any serious policymaker or crypto participant. The stablecoin legislation they reference involves fully reserved payment instruments that are overcollateralized with liquid government bonds, and the Trump administration's bitcoin reserve proposal does not require new taxpayer expenditure. In contrast, when Silicon Valley Bank collapsed in 2023, the Biden administration authorized measures to guarantee all deposits, raising questions about selective moral hazard concerns. The op-ed implies that crypto industry political donations are corrupt, but this suggestion would implicate virtually every sector of the American economy. The crypto industry turned to political participation as a last resort, a cornerstone of American democracy, after being denied a fair hearing by regulators. If political spending is problematic, the authors should examine their own side's actions during the Biden administration, when Bankman-Fried predominantly donated to Democrats. The Biden administration had a historic opportunity to establish the United States as a global leader in digital asset regulation by creating clear, fair rules that would protect consumers and foster innovation. Instead, it chose to weaponize the banking system against a legal industry, resulting in a lose-lose-lose situation for innovation, consumer protection, and the U.S. crypto ecosystem. Cummings and Bernstein claim that crypto boosters have run out of excuses, but it is actually the Biden administration's crypto critics who owe the public an explanation.