The Unintended Consequences of Biden's Crypto Policy

The decline of bitcoin's price does not vindicate the Biden administration's crypto policy, as former advisers Ryan Cummings and Jared Bernstein suggest. Their New York Times op-ed is a prime example of selective memory, omitting crucial facts about the administration's regulatory approach. The authors claim the administration 'increasingly aggressive regulatory efforts' curbed scams and fraud, but this narrative is misleading. Under the Biden administration, FTX, a company run by a top Democratic donor, grew to enormous scale and eventually became one of the largest financial frauds in history. The administration's strategy of regulation-by-enforcement, rather than establishing clear rules, had a devastating effect: legitimate companies were driven offshore or out of business, consumers were harmed, and American innovation was stifled. Meanwhile, bad actors thrived in the confusion. The authors ignore the troubling episode of 'Operation Choke Point 2.0,' where banks, under pressure from federal regulators, systematically debanked lawful crypto businesses, cutting them off from the financial system without due process. The Biden administration's approach 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.' However, they acknowledge that crypto is used for international wire transfers, but downplay the significance of enabling fast, low-cost cross-border remittances for millions of people. In reality, global remittance fees average nearly 6.5%, costing migrant workers and their families billions of dollars each year. Stablecoins running 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' claim that no 'giant tech firms' are using blockchain technology is incorrect, as companies like Fidelity, JPMorgan, and BlackRock are actively building on blockchain infrastructure. Using short-term price movements to condemn an entire asset class is analytically unserious. The op-ed's labeling of the Bitcoin network as 'slow' is also misleading, as it prioritizes security over speed. The authors repeatedly invoke the straw man of a taxpayer-funded bailout of the crypto industry, which no serious policymaker has proposed. The stablecoin legislation they reference creates fully reserved payment instruments that are overcollateralized with liquid government bonds. The Trump administration's bitcoin reserve proposal involves no new taxpayer expenditure. The Biden administration's concern about moral hazard was selective, as they authorized extraordinary measures to guarantee all deposits when Silicon Valley Bank collapsed in 2023. 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 indict virtually every sector of the American economy. The crypto industry turned to the political process as a last resort, a cornerstone of American democracy. The Biden administration had a historic opportunity to establish the United States as the global leader in digital asset regulation, but instead 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.