Old Critiques Resurface: Why Regulators Still Don't Understand Bitcoin

Old Critiques Resurface: Why Regulators Still Don't Understand Bitcoin

As Bitcoin experiences market volatility in 2026, U.S. regulatory figures are seizing the opportunity to resurrect familiar criticisms of cryptocurrency—revealing a fundamental misunderstanding of what Bitcoin represents. Federal Reserve Bank of Minneapolis President Neel Kashkari's dismissal of crypto as "utterly useless" and Senator Elizabeth Warren's demands for federal agencies to refuse any cryptocurrency market support demonstrate how deeply entrenched regulatory skepticism remains, even as the asset class has demonstrated resilience through multiple cycles over more than a decade.

These critiques, while politically convenient during market downturns, expose a troubling blind spot among policymakers: they evaluate Bitcoin through the narrow lens of domestic payment efficiency rather than understanding its role as a censorship-resistant, borderless store of value and settlement layer.

The Facts

During remarks at the 2026 Midwest Economic Outlook Summit in Fargo, North Dakota, Federal Reserve Bank of Minneapolis President Neel Kashkari delivered pointed criticism of cryptocurrency, stating that "crypto has been around for more than a decade and it's utterly useless" ^[1]. He contrasted digital assets unfavorably with artificial intelligence tools, which he argued demonstrate clear utility for consumers and businesses.

Kashkari specifically dismissed stablecoins, questioning their advantages over existing services: "I can send any one of you $5 with Venmo or PayPal or Zelle. So what is it that this magical stablecoin can do?" ^[1]. While acknowledging claims about improved cross-border transfers, he argued that recipients must still convert digital tokens into local currency, creating friction and cost. This criticism echoed his November comments comparing cryptocurrency to the 1990s Beanie Babies bubble ^[1].

Meanwhile, Senator Elizabeth Warren of Massachusetts sent a letter to Treasury Secretary Scott Bessent and Federal Reserve Chair Jerome Powell demanding confirmation that no taxpayer funds would support cryptocurrency investors or firms ^[2]. "Your agencies must refrain from propping up Bitcoin and transferring wealth from taxpayers to crypto billionaires through direct purchases, guarantees, or liquidity facilities," Warren wrote ^[2].

Warren's letter highlighted Bitcoin's approximately 50% decline from its October peak and noted cascading liquidations affecting leveraged positions ^[2]. She cited losses among major crypto investors, including Michael Saylor's Strategy Inc., whose shares fell nearly 20% year-to-date, and reported losses for Binance founder Changpeng Zhao and Coinbase CEO Brian Armstrong ^[2]. The senator also referenced $17 billion in cryptocurrency fraud losses among U.S. investors in 2025 ^[2].

The Warren letter came after Treasury Secretary Bessent deflected questions about potential government intervention in cryptocurrency markets during a February 6 House Financial Services Committee hearing, stating only that Treasury was "retaining seized Bitcoin" ^[2]. At the time of Warren's letter, Bitcoin was trading just under $67,000 ^[2].

Analysis & Context

Kashkari's criticism reveals a fundamental category error that persists among traditional financial regulators: evaluating Bitcoin primarily as a domestic payment network competing with Venmo or PayPal. This framework misses the asset's core value propositions entirely. Bitcoin was never designed to optimize sending $5 to a friend in the same jurisdiction—it was created as a permissionless, censorship-resistant monetary network that operates independently of state control.

The comparison to Venmo is particularly telling. These payment apps are merely interfaces to the existing banking system, subject to account freezes, geographic restrictions, and regulatory capture. They work efficiently within established frameworks precisely because they pose no challenge to existing power structures. Bitcoin's "inefficiency" in this narrow context is actually a feature: the computational cost and decentralization that make it slower than centralized payment rails are precisely what make it resistant to seizure, censorship, and debasement—attributes that billions of people in countries with unstable currencies or authoritarian governments find invaluable.

Warren's anti-bailout stance, while superficially reasonable, conflates Bitcoin with the traditional financial institutions that required taxpayer rescues in 2008. The irony is profound: Bitcoin was created in direct response to those very bailouts, as evidenced by Satoshi Nakamoto's embedded message in the genesis block referencing bank bailouts. Bitcoin's architecture explicitly prevents the kind of moral hazard and socialized losses that characterized the financial crisis. No bailout is needed or even possible in Bitcoin's protocol—liquidations and losses are features of a market without implicit government guarantees.

Historically, regulatory criticism intensifies during market corrections and largely disappears during bull runs, suggesting these critiques are more opportunistic than principled. Similar dismissals occurred after the 2014 Mt. Gox collapse, the 2018 bear market, and the 2022 FTX implosion—yet Bitcoin has survived each crisis while the core protocol has never been compromised. The pattern suggests these officials either misunderstand or deliberately misrepresent the distinction between Bitcoin's base layer and the speculative ecosystem built around it.

Key Takeaways

• Regulatory officials continue to evaluate Bitcoin through an outdated framework, comparing it to domestic payment apps rather than understanding its role as a censorship-resistant global settlement layer and store of value

• Kashkari's dismissal ignores Bitcoin's fundamental value proposition for billions of people in countries with currency instability, capital controls, or authoritarian governments—use cases irrelevant to a Federal Reserve official in Minneapolis

• Warren's anti-bailout letter, while politically convenient, fundamentally misunderstands that Bitcoin was created specifically to eliminate the need for bailouts through its protocol-level rules—no government intervention can or should "rescue" Bitcoin markets

• The timing of intensified criticism during market volatility follows a predictable pattern across Bitcoin's history, with regulatory concerns ebbing during bull markets and flowing during corrections

• The persistent regulatory misunderstanding highlights Bitcoin's success at its core mission: creating a monetary system that operates independently of—and sometimes in opposition to—traditional financial and governmental institutions