Cryptocracy
The crypto industry is suddenly at the heart of American politics
Thank the Trump family’s investments, friendly regulators and lavish election spending
IN LATE APRIL Fr8Tech, a logistics firm based in Texas with a market capitalisation of about $3m, initiated an unusual investment.
It said it was borrowing as much as $20m to buy $TRUMP coins, a cryptocurrency Donald Trump had launched three days before beginning his second term as president.
(“Join my very special Trump Community.
GET YOUR $TRUMP NOW,” he urged on social media.)
The company managing $TRUMP had just announced that the biggest investors in the meme coin would be invited to dine with the president in late May.
Javier Selgas, Fr8Tech’s CEO, said buying the coin would be “an effective way to advocate” for the sort of trade policies Fr8Tech wants.
That same week, on the opposite side of the world, fireworks lit up the sky in Lahore, a big city in Pakistan.
The Pakistan Crypto Council, which had been established by the finance minister in March to promote the “digital-asset” industry, was celebrating a tie-up with World Liberty Financial (WLF), a firm belonging to Mr Trump and his family.
WLF promised to help Pakistan develop blockchain products, turning real-world assets into digital tokens, and to provide advice on the crypto industry more broadly.
The precise details of the pact, including the financial terms, were not disclosed.
India’s press interpreted the deal as an effort by Pakistan to win Mr Trump’s favour—an interpretation that became more awkward two weeks later when Mr Trump took credit for a ceasefire in a fast-escalating military conflict between India and Pakistan.
Many Indians believe the truce is unduly favourable to Pakistan.
The two events are signs of a revolution in Washington.
Crypto is ascendant.
The president, his wife and his children all promote it at home and abroad.
Regulators appointed by Mr Trump are taking a more permissive approach to it.
Investors are piling into it.
Big pressure groups have sprung up to back political candidates who support it and to punish those who oppose it.
Investors and cheerleaders, including foreign governments, are discovering that it can provide access to well-connected people.
The young industry suddenly finds itself at the heart of American public life.
But its close association with the Trump family is also turning it into something of a partisan cause.
Mr Trump’s enthusiasm for crypto may end up doing the industry more harm than good.
Token presence
Many industries have become enmeshed in the political class over the years.
Banks, arms manufacturers and big pharmaceutical companies have long maintained a presence in the corridors of power.
In the late 19th century, railroad firms wielded enormous influence in national and local politics, securing favourable regulation that contributed to a dramatic boom and a ruinous bust.
But no industry has leapt from near-pariah status to the darling of officialdom at the astounding speed of crypto.
At the beginning of Mr Trump’s first term, the combined value of all cryptocurrencies in the world was less than $20bn. Today it is more than $3trn (see chart 1).
When Mr Trump nominated Jay Clayton to head the Securities and Exchange Commission (SEC) in 2017, crypto received no mention at all during his confirmation hearing in the Senate.
As recently as 2021, the president disdained digital assets.
“Bitcoin just seems like a scam” he said of the biggest cryptocurrency.
“I don’t like it because it’s another currency competing against the dollar.”
His views seemed vindicated the following year, when a slump in the prices of digital assets and an $8bn fraud at FTX, a big cryptocurrency exchange, heralded a downturn for the industry known as “the crypto winter”.
Regulators, too, took a dim view of many crypto assets.
Gary Gensler, the head of the SEC under Joe Biden, Mr Trump’s predecessor as president, insisted that many cryptocurrencies were in fact securities and should therefore be traded only on exchanges regulated by the SEC.
The agency duly sued big crypto-trading websites such as Coinbase and Binance, along with many other digital-asset firms.
Since Mr Trump returned to office, however, the very same financial watchdogs that were trying to curb crypto under Mr Biden are suddenly eager to foster it.
That is because Mr Trump has appointed true believers to lead them.
Paul Atkins, the new head of the SEC, spent eight years as the co-chairman of a crypto industry group.
Brian Quintenz, Mr Trump’s nominee to head the Commodity Futures Trading Commission, another financial regulator, was previously head of crypto policy at Andreessen Horowitz, a prominent venture-capital firm.
The change of leadership at the SEC has already led to a dramatic shift in policy.
It now takes a far narrower view of which crypto assets are securities, and therefore of what it needs to police.
Hester Peirce, who runs the commission’s new crypto task-force, is affectionately known in the industry as “crypto mom”.
More than a dozen enforcement actions against crypto firms have been halted since Mr Trump’s inauguration, including against Coinbase and Crypto.com, two of the largest brokerages, against Ripple Labs, issuer of one of the largest cryptocurrencies, and against Kraken, the first crypto firm to secure a state bank charter.
All this has of course boosted the industry: venture-capital funds poured almost $5bn into crypto firms in the first three months of 2025, the highest sum in almost three years.
Big regulatory reversals are not unheard-of when a new president comes into office and installs like-minded officials.
The pendulum often swings from the meddling to the permissive when a Republican administration takes over from a Democratic one.
What is unusual, however, is how deeply the president and his family are involved in the industry benefiting from the relaxation of regulation.
Coin flip
From a standing start a few months ago, the president’s family’s investments in crypto have been growing by the day.
WLF, in which the Trump family owns a 60% stake, was launched in September.
The firm announced a new stablecoin (a cryptocurrency pegged to the value of another asset, typically American dollars) in March.
The coin, named USD1, already has a market capitalisation of more than $2bn, making it one of the largest dollar-pegged cryptocurrencies in the world.
Steve Witkoff, Mr Trump’s main foreign-policy fixer, is WLF’s “co-founder emeritus”; his son Zach Witkoff is a “co-founder”.
Mr Trump himself is “chief crypto advocate”.
His sons are on the “team”.
A footnote on its website cautions, “Any references to or quotes or imagery attributed to or associated with Donald J. Trump or his family members should not be construed as an endorsement.”
A spokesman says WLF is a private enterprise, with no political affiliations, and that nobody working in Mr Trump’s administration is involved in its management.
Mr Trump has other crypto assets beyond WLF.
There is the $TRUMP meme coin (a cryptocurrency created to capitalise on a trend or joke), which surged in value after its launch on January 17th, reaching a peak of around $15bn in market capitalisation before slumping to a fraction of that.
Companies associated with the Trump family own 80% of the coins.
Another meme coin was launched by Melania Trump, the president’s wife, on January 19th. Its value surged, too, then collapsed (see chart 2).
The president also has direct financial interests in crypto through Trump Media and Technology Group, a social-media company in which Mr Trump owns a 52% stake.
In April the company announced a tie-up with Crypto.com, one of the firms that the SEC recently dropped a case against, to sell exchange-traded funds involving both digital assets and other securities.
Trump Media and Technology says it is also considering launching a crypto wallet and currency itself.
The volatile nature of the assets and uncertainty about their ownership makes it tough to determine exactly how much of the Trump family’s wealth is tied up in these investments.
Crypto may now constitute the family’s largest single line of business.
The family’s holdings of the $TRUMP meme coin alone are worth almost $2bn, not much less than all his properties, golf courses and clubs (see chart 3).
It’s not only the Trump family who have helped rehabilitate crypto.
Big electoral pressure groups (superPACs, in the jargon) have been spending lavishly to promote the interests of the industry: Protect Progress, Fairshake and Defend American Jobs, a network of affiliated superpacs, dispensed over $130m in the run-up to last year’s elections, making them among the highest spenders of the campaign.
All of them had been founded since the previous presidential election.
With $260m in receipts during the last electoral cycle, Fairshake is not just the largest PAC advocating for a specific industry, but also the largest non-partisan superPAC of any kind.
The National Association of Realtors, by comparison, raised about $20m.
Ripple and Coinbase are the biggest corporate donors to Fairshake, and Marc Andreessen and Ben Horowitz of Andreessen Horowitz are the largest individual contributors.
Rather than stress candidates’ views on crypto, Fairshake runs ads on any issue that may boost favoured politicians or hinder those it dislikes.
It helped secure the defeat of Katie Porter, a Democratic congresswoman, in California’s Senate primary with an ad that criticised her for trying to sell a list of donors to her campaign.
Another, in support of congressman Pat Ryan of New York, praised him as tough on crime.
“Many industries have tried this.
The difference is the singular focus, that’s what really changed the game,” says Josh Vlasto, a spokesman for Fairshake.
“The founding strategy is and still is: support supporters, and oppose opponents.”
“It’s the most brute force display of money and power in the legislature I have ever seen,” says Amanda Fischer, chief operating officer for Better Markets, an advocacy group that pushes for closer supervision of American finance.
Ms Fischer was also chief of staff to Mr Gensler, the head of the SEC under Mr Biden.
Fairshake alone has $116m in cash on hand to deploy at the midterm elections in 2026.
The industry’s intimidating war chest should help it to persuade Congress to adopt its preferred policies.
Above all, it would like Congress to clarify the legal status of crypto assets, to prevent the regulatory pendulum swinging away from it at a future election.
Presidents and their appointees, after all, come and go; legislation tends to be more lasting.
The industry’s preference would be to have most cryptocurrencies declared commodities, regulated by the Commodity Futures Trading Commission (CFTC) rather than securities under the purview of the SEC.
The CFTC supervises trading in most financial derivatives, and is by far the smaller of the two regulators.
It requested a budget of $399m and 725 full-time staff for the current financial year, compared with the SEC’s $2.6bn and 5,073 staff.
The crypto industry sees it as a lighter touch.
A bill making the CFTC the primary regulator of cryptocurrencies foundered in Congress last year.
But Republicans, who tend to favour lighter financial regulation, have been in control of both chambers since January.
What is more, plenty of Democrats acknowledge the benefit of putting crypto assets on a clearer legal footing.
Yet the Trump family’s crypto frenzy is making it harder for the industry to win sufficient support in Congress.
Losing currency
Mr Trump’s clear conflicts of interest have triggered a wave of criticism from Democratic lawmakers.
They argue that many investors are going into business with the Trump family or buying Trump-related crypto assets simply to curry favour with the president.
In effect, they are accusing Mr Trump of selling access to power.
They point to the jump in the price of the $TRUMP meme coin, for example, after the dinner with Mr Trump for big investors was announced.
Another furore concerns the decision by MGX, an investment firm established by the government of Abu Dhabi, to use WLF’s USD1 as a vehicle to invest $2bn in Binance.
The use of a cryptocurrency to fund such a large investment is in itself unusual.
The commercial logic for using such a new and untested one is even less clear.
But the benefit to WLF has been enormous: the transaction launched USD1 from obscurity to become the world’s seventh-largest stablecoin.
On May 8th a bipartisan bill creating a clear regulatory framework for stablecoins failed to win the Senate’s approval.
Advocates for the bill had been confident that it would pass.
But Democrats who had previously seemed well disposed towards it have begun fretting that it might fuel what they consider to be the president’s influence-peddling.
Jeff Merkley and Chuck Schumer, two Democratic senators, have introduced a bill to stop the president, members of Congress and senior White House officials from issuing, sponsoring or endorsing crypto assets.
Even Cynthia Lummis, a Republican senator who has campaigned energetically for clearer regulation of cryptocurrency and who is a co-sponsor of the bill in question, told NBC, an American broadcaster, that Mr Trump’s meme-coin dinner “gives me pause”.
Concerns about crypto regulation are not limited to the president’s connections to the industry.
Steven Kelly of the Yale Program on Financial Stability, part of Yale University, argues that a fast-growing crypto industry, supervised by a relatively small regulator with a hands-off philosophy could pose risks to financial stability.
He notes that crypto was at the centre of the crisis that shook American banks in 2023.
The banks where the crisis began—Silvergate, Silicon Valley, and Signature—did lots of business with crypto firms and investors and therefore were badly hurt by the crypto winter.
When concern about their losses turned into runs, the panic quickly spread to the wider financial system.
To sceptical analysts, normalising the use of volatile crypto assets is bound to inject greater danger into the financial system.
Elizabeth Warren, another Democratic senator, says the stablecoin bill would raise the risk of a financial blow-up.
In public, cheerleaders for crypto remain optimistic that the industry will secure supportive legislation.
In private, though, some of the industry’s leading lights are scathing about the president’s crypto ventures.
They fear that the appearance that the industry has become a vehicle for the president’s influence-peddling will make it impossible for legislators to support favourable legislation.
Nic Carter, a prominent investor in the crypto industry and a supporter of Mr Trump, is one of the few willing to say publicly that the president’s family’s financial interests in the crypto industry are making it harder to get crypto-friendly legislation approved.
The White House, he says, responds badly to such criticism.
“The times I’ve spoken about this, people from the Trump administration have gotten in touch and complained about it.”
Trying to silence those stating the obvious, however, is unlikely to work.
“The conflicts are real,” Mr Carter says.
“Nobody can really dispute it.”
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