Joe Biden's Cryptocurrency Legacy: A Tale of Contrasting Actions

As Joe Biden's presidency concludes, his approach to cryptocurrency leaves behind a complex legacy marked by contrasting actions.

President Joe Biden's approach to cryptocurrency has been a tale of two halves. On the one hand, his administration has taken a more hands-on approach to regulating the crypto industry, with the Securities and Exchange Commission (SEC) launching a record number of enforcement actions against crypto firms. On the other hand, Biden's era has also seen significant progress in institutional cryptocurrency adoption, with regulatory approval for several crypto products and custodians.

As Biden's presidency concludes, his approach to cryptocurrency leaves behind a complex legacy. Here's a closer look at the key events that have shaped the crypto landscape during Biden's term.

Stringent crypto regulation

One of the most notable aspects of Biden's approach to cryptocurrency has been the increased regulatory scrutiny of the crypto industry. In April 2023, the SEC announced a new specialized crypto unit to enhance oversight and enforcement. This move came amid a broader effort by the Biden administration to ramp up crypto regulation following the collapse of several major crypto firms, including FTX and BlockFi.

The SEC, under the leadership of Gary Gensler, has taken the lead in this effort. In January 2024, the SEC announced a total of 103 legal actions against crypto firms for failing to register as securities brokers or exchanges. These enforcement actions, largely focused on crypto exchanges and lending platforms, aimed to address perceived non-compliance with legal standards for offering and facilitating securities trades.

However, this stringent approach drew criticism from the crypto industry, which viewed these measures as overly aggressive and stifling technological advancements. In particular, the crypto industry took issue with the SEC's expansive definition of a security, which subjected a wide range of crypto assets and activities to stringent securities regulation.

Tensions between the Biden administration and the crypto industry escalated in mid-2024 when a group of crypto executives accused the administration of using financial regulators to restrict banking services access for crypto companies. This move, aimed at limiting the ability of crypto firms to conduct business with traditional banks, sparked outrage within the crypto community.

Despite these tensions, Biden's administration also took steps to foster dialogue and engagement with the crypto industry. In March 2024, the White House convened a meeting with crypto industry representatives to discuss regulatory concerns and the administration's upcoming executive order on digital assets. This meeting signaled an effort by the administration to maintain open lines of communication with the industry.

Institutional crypto adoption

While the Biden administration's approach to cryptocurrency has been largely defined by increased regulation, this period has also seen significant strides in institutional cryptocurrency adoption.

One of the most anticipated developments was the approval of several crypto products by the SEC. In March 2023, the SEC paved the way for the launch of spot Bitcoin and Ether ETFs, opening up broader access to digital investments for mainstream investors. This move marked a turning point in the crypto industry's quest for regulatory recognition and mainstream integration.

In addition to crypto ETFs, the SEC also approved several other crypto products, including a Bitcoin trust from Grayscale and a crypto index fund from VanEck. These approvals brought a diverse range of crypto investment vehicles to the market, catering to varying risk appetites and investment strategies.

Together with an increase in digital asset custodians like Coinbase and Fidelity, these developments positioned the United States as a crucial player in institutional crypto custody. At the end of 2024, the US had the highest institutional crypto custody penetration rate globally at 84%, according to data from Chainalysis. This growth in institutional crypto custody signaled a maturing crypto market and increasing demand for secure storage solutions.

Another key aspect of Biden's approach to cryptocurrency was the administration's support for innovation in tokenization. This initiative aimed to leverage blockchain technology to tokenize traditional financial instruments, such as money market funds and certificates of deposit, to enhance efficiency and accessibility.

In December 2023, Franklin Templeton introduced a tokenized money fund, marking the first time an investment vehicle of this kind utilized blockchain technology for recordkeeping with SEC approval. Throughout Biden's term, the total value locked in US tokenized money funds, which includes the contribution of major stablecoins like USD Coin (USDC), surged to over $100 billion.

This development attracted the attention of the US Treasury, which engaged in discussions on the potential of tokenization for broader economic transformation. The Treasury ultimately proposed a new framework for digital asset regulation, incorporating recommendations on stablecoins and tokenization.

Crypto community anticipates Trump's policies

As Donald Trump assumes the presidency, the crypto community is eagerly awaiting how his policies might further shape the landscape of digital currencies, especially in the realm of tokenization and market expansion, potentially transforming the US financial markets.