Why the Biden Administration Wants to Kill Crypto

by | Mar 25, 2024 | Banks, Biden Administration, Blog Articles, Crypto, Finance, Monetary System, Politics, USA

When a powerful interest holds a profitably monopoly, it will fight tooth and nail to defend it. So, it is no surprise that the Biden administration and its allies have gone on the offense against the nascent cryptocurrency industry though a coordinated effort of regulatory overreach, legal action, de-banking, and propaganda.

Crypto has been labeled by U.S. officials as having no legitimate use case except as a haven for terrorists, money launderers, sex trafficking, and other criminal activity. In December, Sen. Elizabeth Warren introduced legislation in the Senate to crack down on crypto’s “use in enabling terrorist groups, rogue nations, drug lords, ransomware gangs, and fraudsters to launder billions in stolen funds, evade sanctions, fund illegal weapons programs, and profit from devastating cyberattacks.” This came just months after Sen. Warren falsely asserted that Hamas had raised over $130 million in funding through crypto, a wild claim that was quickly debunked by the data. Not to be outdone, JPMorgan’s CEO Jamie Dimon told the Senate Banking Committee in December that Bitcoin was “worse that tulip bulbs” (referring to a previous speculative mania) and that “If I was the government, I’d close it [crypto] down.”

These and other fallacious arguments against crypto continue despite ample evidence that cash, not crypto, is the medium of exchange of choice for the world’s rogue’s gallery. In February of 2024, the U.S. Treasury issued a report confirming that cash, because of its anonymity, acceptability, and stability, still represents the preponderance of illicit use. Criminals who have tried to use Bitcoin have painfully discovered that the blockchain lives forever and that their actions can be readily traced by the long-arm of global law enforcement.

Two years ago this month, President Biden issued an executive order calling for federal agencies to coordinate their approach to digital assets, noting the rapid growth of what was already by then a $3 trillion industry by market capitalization. The objective of the order was stated as: protecting the consumer and investors; protecting U.S. and global financial stability and reducing systemic risk; “mitigate[ing] the illicit finance and national security risks posed by misuse of digital assets;” and reinforcing U.S. leadership in the global financial system. In reality, the underlying objective of the president’s directive wasn’t to facilitate the healthy development of the nascent industry but to ensure inter-agency coordination of its demise, and thus protect the dominant monetary regime of the U.S. and the dollar as the global reserve currency, both of which are under threat.

The Biden administration used the November 2022 collapse of FTX, a leading cryptocurrency exchange whose founder, Sam Bankman-Fried (SBF), was recently convicted of fraud and money laundering, as further motivation for its attack on crypto innovation. SBF used FTX to carry out a billion dollar Ponzi scheme akin in scale to what asset manager Bernie Madoff, energy trader Enron, and telecommunications company WorldCom perpetrated in other industries. In the wake of these scandals, the U.S. government never sought to outlaw Wall Street financial advisors, energy trading firms, or telecoms companies, but the Biden administration and the federal government have used FTX as a cover to dismantle the crypto sector in the U.S. FTX was a fraud story, not a crypto story, but nonetheless it gave the government the narrative it needed.

Shortly thereafter, in January 2023, the Federal Reserve warned member banks that holding, investing, or transacting in cryptocurrencies, stablecoins, or other digital assets was not considered permissible banking activities. The banks quickly got the message and moved to dispose of tokens, de-bank crypto platforms, and close crypto on- and off-ramps for customers desiring to transact in digital assets. Those banks that were crypto-centric, with names such as Signature, Silvergate, and SVB, soon found themselves forced by regulators to close their doors and sell their assets.

In June 2023, the Securities and Exchange Commission (SEC) filed suits against two of the largest cryptocurrency exchanges, Binance and Coinbase. Binance, also facing charges from the CTFC and under investigation by the DoJ, settled the 13 charges weighed against it, agreed to a $4.3 billion fine, and greatly reduced its U.S. exposure, while its CEO pled guilty to a felony charge. Coinbase has counter-sued the SEC, and the dispute continues unresolved. Coinbase is reportedly moving parts of its operations outside of the U.S.

To date, the fifteen largest regulatory enforcement actions, half of which were settled in 2023 alone, have netted the U.S. government $12.4 billion in proceeds. Regulators would attempt much more, but they are getting push back in the courts and in Congress. In a recent crypto case brought by the SEC, a Federal court imposed sanctions on the SEC and accused it of “bad faith” and a “gross abuse of power” in pursuing legal action against a small crypto exchange.

The SEC, led by crypto-antagonist Gary Gensler, long resisted approving Bitcoin Exchange Traded Funds (ETFs). The SEC’s hand was forced after failing to find a legitimate reason to not allow Bitcoin ETFs. Jamie Dimon’s opinion stated before the Senate hasn’t stopped JPM, the closest thing the U.S. has to a national bank, from benefiting from the recent boon in Bitcoin ETFs, which have recently accumulated nearly $70 billion in assets following SEC approval in January.

The rationale behind the Biden administration’s actions is clear. The U.S. government—enabled by the TBTF banks like JPM—sees the crypto industry as a threat to its monopoly power over the currency. The government can only continue to run trillion dollar deficits, mount eye-watering levels of national debt, and launder it all through the banking system if its citizens have no choice but to accept (through legal tender laws) a currency with persistently high inflation as a hidden tax on their wealth and livelihood. Bitcoin, Ethereum and other cryptocurrency alternatives provide a digital form of monetary freedom similar to what gold has provided for centuries. Lest we forget, in 1933 the U.S. government under President Franklin D. Roosevelt outlawed U.S. citizens from owning or transacting in gold, deceptively and coercively buying up the private inventory of law-abiding Americans at artificially depressed levels. We are witnessing a similar process with digital assets, although we have not yet reached the stage where holding Bitcoin is declared criminal.

The Biden administration’s coordinated attack on non-state monetary alternatives has resulted in a partial paralysis of the digital assets industry in the United States, with many entrepreneurs and platforms moving offshore. This has harmed U.S. competitive interests and has stifled American innovation and participation in one of the most promising monetary, financial, and technological innovations of our lifetimes. And it has deprived American citizens of unencumbered access to a potential exit from the madness imposed by the money printer at the Federal Reserve.

 

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