Eddie Haskell
2025-01-28 19:29:18 UTC
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Permalinkcorruption
With Trump promising the US will be crypto capital of the planet, experts
say the industry is poised for laxer oversight
Peter Stone in Washington
Mon 27 Jan 2025 12.00 GMT
With Donald Trump tapping top regulators with cryptocurrency ties and
promising to make the US the crypto capital of the planet, the
controversial and scandal-plagued industry is poised for laxer oversight
and faster growth, which ethics watchdogs and ex-prosecutors fear could
pose dangers for investors and spur potential criminal abuses.
The presidents pro-crypto stances have come as he wooed crypto companies
to ratchet up their campaign contributions to help him win the White House.
Although in 2021 Trump called bitcoin a scam, he also announced last fall
that he and his sons were helping launch a new crypto business, dubbed
World Liberty Financial, they can profit from.
Underscoring his own growing ties to the speculative crypto business, Trump
in a stark act of self-enrichment days before his inauguration revealed
another crypto venture, a personal meme coin dubbed $Trump which drew
strong criticism from ethics watchdogs, economists and some industry
insiders.
The Trump meme coin represents the intersection of Trumps grifting
tendencies and his administrations embrace of cryptocurrencies, along with
his dismissive attitude toward government regulation, said the Cornell
economics professor Eswar Prasad.
A cartoon image of Donald Trump holding a cryptocurrency token on a sign as
people walk by
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More broadly, Prasad foresees that under Trump regulatory agencies and top
administration officials will contribute legitimacy to crypto assets,
notwithstanding the highly speculative nature of these investments and the
perils of exposing unsophisticated retail investors to their volatility.
The political fortunes of the crypto industry have soared as its leaders
ponied up millions of dollars to help Trumps campaign and inaugural bashes
including a crypto ball and accelerated lobbying of the new
administration and Congress to achieve their priorities.
In an early sign of laxer oversight for the industry, crypto executives
applauded when Trump last month tapped Paul Atkins who founded a pro-
cryptocurrency group to chair the Securities and Exchange where he used to
be a commissioner.
Moreover, Trump issued an executive order last Thursday to support the
growth of cryptocurrency that called for a new working group to explore
establishing a national crypto stockpile and propose new digital asset
regulations, fulfilling his promise to revamp crypto policies.
Trump has also earned kudos from crypto companies for appointing David
Sacks, a Silicon Valley venture capital mogul who helped found PayPal and
has good ties with the billionaire and crypto enthusiast Elon Musk, to be
the first crypto and AI czar in his new administration.
At the crypto ball Sacks declared the reign of terror against crypto is
ending. The same night Trump took to his Truth Social platform to launch
$Trump, which has no inherent value but whose price soared before Trumps
inauguration increasing his paper worth by billions of dollars.
Trumps blatant mixing of his political efforts to boost crypto via less
regulation and his own pursuit of crypto wealth have sparked strong
criticism from watchdogs and experts.
Most people who have any concern for basic ethical principles, not to
mention the specific rules and norms of government ethics, would find
Trumps launching a cryptocurrency token as he is about to be inaugurated
as president outrageous, said the ex-Federal Election Commission general
counsel Larry Noble, who now teaches law at American University.
The anonymity involved with cryptocurrency transactions will apparently
allow anyone looking for favorable treatment from Trumps administration,
including US businesses, as well as foreign actors and countries, to
participate in making Trump wealthier than ever by just buying his token.
Other critics offer equally harsh assessments of Trumps crypto ploy, in
which Trump organization affiliates reportedly have an 80% stake.
The coins value could be influenced by his actions or policies once in
office, particularly as Trump has said he will be more crypto-friendly,
which likely will further inflate the coins value at least temporarily,
said Richard Painter, George W Bushs chief ethics counsel who teaches law
at the University of Minnesota.
Likewise in a broader critique, the Democratic senator Elizabeth Warren of
Massachusetts told the Guardian: Trump should be focused on lowering costs
for Americans, not conning them out of their savings to juice the value of
crypto tokens for himself and his family.
Trumps wife, Melania, launched her own meme coin $Melania not long after
her husbands.
A man who is Donald Trump turns to say something in the ear of Melania
Trump who is standing next to him
Melania Trump launches meme coin as crypto conflicts worry experts
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Some experts are worried too about wider risks to the economy stemming from
proposals for creating a bitcoin reserve for the US which Trump has
suggested he may back and some top industry leaders favor.
Establishment of a bitcoin reserve would give the cryptocurrency an
official imprimatur and result in the US government taking on the risks
associated with its price volatility, Prasad said.
Prasad added: This is neither a strategic nor sensible idea but instead
benefits bitcoin holders while sticking US taxpayers with the bill and
exposing the government to financial risks. The US government would become
a key driver of bitcoins price on the way up and down.
Such criticisms seem unlikely to deter the Trump administrations pro-
crypto momentum which is being fueled by industry lobbyists with strong
Trump ties and tens of millions in campaign spending that benefitted
congressional allies and Trump.
Top crypto companies expanded their influence efforts in recent weeks by
ponying up millions of dollars to Trumps inaugural, and hiring high-
profile lobbyists who have been top fundraisers for Trump and boast strong
ties to him.
Among others, the crypto firm Ripple pledged $5m of its own cryptocurrency
to the inaugural, making it one of the largest donors. Ripples outside
lobbying team includes Michael Best Strategies whose board is chaired by
Trumps ex-chief of staff Reince Priebus.
After Trumps election, Ripple also hired power lobbyist Brian Ballard who
has been a major Trump fundraiser since 2016. Ballard Strategies, his
eponymous lobbying firm, also represents Robinhood, a key industry trading
platform which chipped in $2m to the inaugural.
Trumps ardent wooing of crypto leaders was apparent at a bitcoin
conference last summer where he vowed to oust SEC chair Gary Gensler who
industry leaders disliked for his tough regulatory actions, and Trump
pledged to make the US the bitcoin capital of the world.
Trumps personal enthusiasm for alternative currency was highlighted last
September when he announced on Musks X that his family including Eric and
Don Jr were helping launch World Liberty Financial, a crypto venture that
they can profit from financially though they wont manage.
Last month, World Liberty was a prominent player at a lavish two day
bitcoin event in Abu Dhabi that featured a keynote talk by Eric Trump. The
conference also drew Trumps special Middle East envoy, Steve Witkoff, who
helped to found World Liberty which now boasts as its top investor Chinese-
born entrepreneur Justin Sun, who attended the Abu Dhabi event and has
reportedly pumped $75m into World Liberty, has led another crypto firm
called Tron that has drawn regulatory scrutiny. In 2023, the SEC filed
fraud charges and other securities law violations against Sun and three of
his wholly owned companies including the Tron Foundation Limited.
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At the Abu Dhabi bash, Eric Trump promised that his father would be the
most pro-crypto president in the history of America.
Despite Trumps public backing for crypto and his own financial stakes in
the business, there are mounting signs of crypto abuses which trouble
critics.
Among the worries are various criminal abuses of the currency including by
some dangerous foreign actors linked to North Korea.
Last month, a study by a leading blockchain firm, Chainanalysis, found that
North Korean hackers had stolen $1.34bn of cryptocurrency in 2024, a record
sum and double what they stole in 2023.
The report concluded that US and foreign analysts believe that the stolen
funds were being used to finance its weapons of mass destruction and
ballistic missile programs.
In the US, too, major crypto fraud schemes have triggered alarms.
Sam Bankman-Fried, who founded the now bankrupt FTX crypto exchange, was
sentenced to 25 years in prison last March by a New York judge for bilking
customers out of $8bn.
More broadly, the FBI revealed in an annual report last September that
fraud related to crypto businesses skyrocketed in 2023 as Americans
suffered $5.6bn in losses, a 45% jump from the prior year.
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Such abuses have prompted crypto critics to urge stronger not weaker
cryptocurrency regulations to stymie fraudsters and the potential for wider
economic fallout.
There is substantial risk that our next financial crisis could result from
inflation of the value of crypto currency (ie a bubble), just as the last
crisis arose from securities-based swap agreements and mortgage back
securities which prior to 2008 were loosely regulated, said Painter.
Warren stressed that Congress ought to work in a bipartisan way to set
common sense rules of the road for crypto that facilitate competition and
innovation and have real safeguards to protect our national security and
protect consumers, investors and our broader financial system from
potential shocks.
Other senior Democrats foresee meme coins undermining campaign finance
curbs.
The crypto meme coin could spell the end of any campaign finance law as we
know it, said the Democratic representative Jamie Raskin of Maryland.
Its an opportunity for an interested donor to put millions or billions of
dollars in the possession of a politician. If theres a foreign or domestic
interest that wants to secretly channel money to the president they can do
it this way.
Former prosecutors too raise red flags about crypto criminal schemes.
The crypto world is just the latest context in which fraudsters and
grifters have learned to operate. Its a shiny new object that people want
to reach for in the hope that it will make them rich, said the ex-federal
prosecutor Stefan Cassella, who heads the firm Asset Forfeiture Law.
Cryptocurrency has given rise to a world of ephemeral assets, marked by a
complexity that few understand and a vocabulary that few have mastered,
that has created opportunities for criminals and challenges for law
enforcement that simply did not exist in any prior age.
Other ex-prosecutors are also quite concerned about the spread of crypto
fraud.
Crypto crime is the manifestation of a new reality in global economic
crime an anonymized digital highway to both commit and conceal the
proceeds of organized criminal activity, said Paul Pelletier, former
acting chief of the fraud section at the justice department.
Because sophisticated criminal actors recognize that law enforcement
presently cannot effectively monitor or stymie the activity, malevolent
state actors like North Korea exploit these weaknesses to fleece billions
from unsuspecting victims across the globe.
It is imperative that US law enforcers and regulators actively and
aggressively develop sophisticated surveillance systems to deter this
emerging and enlarging threat. Sadly, they seem to be moving in the
opposite direction.