Headline: Regulation by Hostility: How Biden-Era Crypto Policy May Have Backfired
In a recent New York Times op‑ed, former Biden economic advisers Ryan Cummings and Jared Bernstein argued that falling bitcoin prices validate the administration’s tough stance on crypto. But critics say that misses the bigger story: the Biden years did not produce a reasoned regulatory framework for digital assets—rather, they produced aggressive enforcement tactics that reshaped the industry, often with unintended consequences.
Enforcement, not rules
Cummings and Bernstein credit the administration with ramping up efforts “to curb scams and fraud.” Yet many observers point out that the era was defined more by enforcement-by-action than by clear, democratically vetted rulemaking. That approach, critics argue, pushed compliance‑minded firms offshore or out of business, reduced U.S. innovation, and left consumers exposed—while bad actors who knew how to navigate political networks still found ways to operate. The most infamous example: FTX’s rapid growth occurred during the Biden administration, and its founder Sam Bankman‑Fried—who met with senior officials including then‑SEC Chair Gary Gensler—ultimately ran what became one of the largest financial frauds in recent memory.
“Operation Choke Point 2.0” and the banking squeeze
One of the most contentious episodes of the period was what critics called “Operation Choke Point 2.0.” Under pressure from regulators, banks reportedly began cutting off relationships with lawful crypto businesses—debanking them—without formal rulemaking or clear legislative backing. That campaign, opponents say, didn’t just affect large firms: it also disrupted ordinary users and small businesses that had turned to crypto because traditional banks often failed to serve them. The result, critics contend, was a domestic ecosystem that was harder for American companies to operate in, even as global competitors moved ahead.
Overlooking real use cases
Cummings and Bernstein dismissed crypto as “a painfully slow and expensive database” with “almost no practical use,” acknowledging only in passing that crypto can enable cross‑border payments. That characterization overlooks a tangible, immediate benefit: remittances. Global remittance fees average roughly 6.5%, costing migrant workers and families billions annually. Stablecoins and blockchain‑based payment rails can move funds in minutes at a fraction of those costs—an important development for households in developing countries.
Beyond remittances, major financial and tech firms are increasingly building on blockchain infrastructure. Fidelity, JPMorgan, BlackRock, BNY Mellon, Morgan Stanley, Visa, Mastercard, Meta, Stripe, Block Inc., and Franklin Templeton are among the institutions investing in or piloting blockchain applications—contradicting claims that no “giant tech firms” are involved.
Volatility isn’t a regulatory argument
Using bitcoin’s price swings as proof of crypto’s failure is, many analysts argue, a weak analytical move. Volatility is characteristic of nascent markets; comparing a crypto downturn to other historical bubble episodes—Amazon’s 94% fall during the dot‑com bust, for instance—suggests price action alone doesn’t prove an asset is “fundamentally worthless.”
Bitcoin’s trade‑offs—speed vs. security—are also often misunderstood. While the Bitcoin network is slower than some newer chains, it prioritizes censorship resistance and immutability: transactions can’t be unilaterally reversed or funds confiscated by intermediaries, a feature that matters to users in repressive jurisdictions. Other blockchains, meanwhile, offer much faster payments.
Bailout fears and questions of consistency
Cummings and Bernstein raise the specter of taxpayer‑funded bailouts for crypto. Few serious proposals advocate that, say critics; most policy conversations (including proposed stablecoin legislation) focus on fully reserved, transparently backed payment instruments—often collateralized with highly liquid government securities. Proposals around a government‑held bitcoin reserve also did not call for new taxpayer outlays.
Critics point to perceived inconsistency in policy responses: during the Silicon Valley Bank collapse in 2023, the federal government acted quickly to guarantee deposits—measures the administration defended as necessary to preserve financial stability. That episode, detractors say, highlights selective concern about moral hazard.
Politics, donations, and the right to lobby
The op‑ed spotlights political donations from crypto executives and implies that industry political activity is inherently suspect. But working the political process is how many industries seek regulatory change in Washington. Denied favorable hearings by regulators, the crypto sector amplified its political engagement—hardly an unusual reaction. Observers note that much political giving in the space flowed to Democrats as well, including significant contributions from Bankman‑Fried prior to FTX’s collapse.
A missed opportunity
Many proponents argue the Biden administration missed a historic opportunity to make the U.S. the global center for digital‑asset regulation—by writing clear, balanced rules that would protect consumers while enabling innovation to thrive domestically. Instead, critics say, the policy mix of aggressive enforcement and informal pressure on banks produced a lose‑lose outcome: American consumers and innovators faced harm, while regulatory uncertainty benefited those willing to skirt the rules.
Cummings and Bernstein conclude that crypto’s defenders “have run out of excuses.” Others would flip the charge: it’s the administration’s crypto critics who owe the public a clearer explanation for why enforcement, rather than rulemaking, became the default—and what that approach has cost American innovation, consumers, and the financial system.
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