Blockchain

Donald Trump’s Cryptocurrency Enthusiasm Is Just Another Scam

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Former US President Donald Trump spoke at the Libertarian National Convention in May and lent his strong support to cryptocurrency: “I will also stop Joe Biden’s crusade to crush cryptocurrency. … I will ensure that the future of cryptocurrency and the future of bitcoin is made in the United States, not pushed abroad. I will support the right to self-custody. To the nation’s 50 million cryptocurrency holders, I say this: With your vote, I will keep Elizabeth Warren and her henchmen out of your bitcoin.”

Former US President Donald Trump spoke at the Libertarian National Convention in May and lent his strong support to cryptocurrency: “I will also stop Joe Biden’s crusade to crush cryptocurrency. … I will ensure that the future of cryptocurrency and the future of bitcoin is made in the United States, not pushed abroad. I will support the right to self-custody. To the nation’s 50 million cryptocurrency holders, I say this: With your vote, I will keep Elizabeth Warren and her henchmen out of your bitcoin.”

Trump continued to court the cryptocurrency industry in the months that followed; he appeared at the Bitcoin 2024 Conference in Nashville this week, alongside independent presidential candidate Robert F. Kennedy Jr. Trump’s parting words, “Have fun with your bitcoin and your crypto and everything else you’re playing with,” were less than enthusiastic, but the industry itself remains full of ardent Trump supporters.

This reversal came as a surprise, given Trump’s previous strong opposition to cryptocurrencies. When Facebook was launching its libra cryptocurrency in 2019, Trump tweeted: “I’m not a fan of Bitcoin and other cryptocurrencies, which are not money and whose value is highly volatile and based on nothing.” Former National Security Advisor John Bolton’s White House memoir, The Room Where It Happened, quotes Trump telling Treasury Secretary Steven Mnuchin: “Don’t be a trade negotiator. Go for Bitcoin [for fraud].” In 2021, Trump said Fox Business that bitcoin “just seems like a scam. … I want the dollar to be the world’s currency.”

Why the change? There doesn’t appear to be any cryptocurrency votes. Trump’s figure of “50 million” comes from a poorly sampled push poll from cryptocurrency exchange Coinbase which said 52 million cryptocurrency users in the United States starting in February 2023. But a survey A survey taken last October by the U.S. Federal Reserve showed that just 7 percent of adults (about 18.3 million people) admitted to holding or using cryptocurrency, down from 10 percent in 2022 and 12 percent in 2021. Many of these people are likely left high and dry bag holders after the 2022 cryptocurrency crash, and not necessarily fans anymore.

What Trump wants from the cryptocurrency industry is money. The cryptocurrency industry has so far raised more than 180 million dollars to support the 2024 U.S. elections through its super PACs Fairshake, Defend American Jobs, and Protect Progress.

Fairshake spent $10 million on pulling out Rep. Katie Porter in the primary battle for Dianne Feinstein’s California Senate seat, funding Porter’s pro-crypto rival, Adam Schiff. She put 2 million dollars to eliminate Rep. Jamaal Bowman in the Democratic primary for New York’s 16th District in favor of pro-crypto George Latimer. In Utah’s Republican Senate primary, Rep. John Curtis defeated Trent Staggs with the help of $4.7 million from Defend American Jobs. In Alabama’s House District 2, a majority of Campaign spending comes from the cryptocurrency sector.

Fairshake is substantially funded of Coinbase, cryptocurrency issuer Ripple Labs, and Silicon Valley venture capital firm Andreessen Horowitz, or a16z. Silicon Valley was awash in cryptocurrency during the 2021 bubble, and a16z in particular continues to to promote blockchain startup even now, and still holds a huge amount of crypto tokens from the bubble that it would like to be able to monetize.

Many in Silicon Valley would like an authoritarian who they believe will let them run free with their money, while bailing them out in times of trouble. In fact, Trump promised Bitcoin 2024 participants that he would keep all the bitcoins that the United States acquires. (Never mind that it is typically acquired as the proceeds of crime.) Silicon Valley explicitly sees regulation of any kind as its greatest enemy. Three a16z manifestos—the 2023 one “Politics and the future” AND “The Techno-Optimist Manifesto” and 2024 “The small technology program“—outlines co-founders Marc Andreessen and Ben Horowitz’s calls for a technology-fueled capitalism unhindered by regulation or social considerations. They name “experts,” “bureaucracy,” and “social responsibility” as their “enemies.” Their 2024 statement claims that banks are unfairly cutting startups out of the banking system; these would be cryptocurrency companies funded by a16z.

Trump’s choice for vice president, Senator J.D. Vance, is a former Silicon Valley venture capitalist. He was once employed by Peter Thiel, who bankrolled Vance’s successful run for Senate in 2022; Vance was described as a “Thiel creation”. He has increased support for the Trump ticket among his venture capital partners. Vance is a bitcoin holder and frequent supporter of cryptocurrencies. He recently circulated a bill to overhaul how the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) oversee cryptocurrencies. In 2023, he circulated a bill to prevent banks from cut out cryptocurrency exchanges.

Minimal regulation has been tried before. It led to the wild exuberance of the 1920s, which culminated in the Black Tuesday Crash of 1929 and the Great Depression of the 1930s. Regulators like the SEC were put in place during that time to protect investors and transform the securities market from a jungle into a manicured garden, resulting in many decades of prosperity and stability.

Cryptocurrencies provide the opposite of a stable and functional system; it is a concrete example of how the lack of regulation allows opportunists and scammers to cause disasters on a large scale. The cryptocurrency crash of 2022 reproduced the 2008 financial crisis in miniature. FTX’s Sam Bankman-Fried was feted as a financial prodigy that would bring economic miracles if only I gave him carte blanche; he ended up stealing billions of dollars of customers’ money, destroyed the lives of ordinary people and is now in a prison cell.

U.S. regulators have long been concerned about the prospect of contagion from cryptocurrencies to the broader economy. Money laundering is endemic in cryptocurrencies; even the Trump administration has created rules in December 2020 to reduce the risk of cryptocurrency money laundering. Meanwhile, the cryptocurrency industry has been persistently trying to insinuate itself into systemically risky corners of the economy, such as pension funds.

Four US banks collapsed during the 2023 banking crisis, the first since 2020. Two of them, Silvergate Bank and Signature Bank, were deeply embedded in the cryptocurrency world: Silvergate in particular appears to have collapsed directly due to its heavy reliance on FTX and went bankrupt a few months later. Silicon Valley Bank was not interested in cryptocurrencies, but it collapsed from a run on the shore due to panic among holders of venture capitalist deposits, particularly Thiel’s Founders Fund.

Project 2025the Heritage Foundation colossus conservative wish list which Trump and Vance have at various times supported and sought to distance themselves from, emphasizes the importance of party loyalists, noting financial regulation in particular. The plan recommends replacing as much of the federal bureaucracy as possible with loyalists and “trusted” career officials rather than nonpartisan “experts.” Vance supported in 2021 that Trump should “fire every single mid-level bureaucrat, every civil servant in the administrative state” and “replace them with our people.” Loyalty is likely to triumph over competence.

Cryptocurrencies are barely mentioned directly in the 2025 Project, suggesting they have little active support among the broader conservative coalition. But toward the end of the manifesto is a plan to dismantle most U.S. financial regulations and investor protections put in place since the 1930s, suggesting the exemption the cryptocurrency industry wants from current SEC and CFTC regulations.

Bitcoin, the first cryptocurrency, started as an ideological project to promote a strange variant of Murray Rothbard’s anarcho-capitalism and the gold-backed Austrian economy we abandoned to escape the Great Depression. Crypto quickly co-opted the John Birch Society and Eustace Mullins “end of the Fed” and “institutional elite” conspiracy theories. It’s a way for billionaire capitalists like Thiel, Andreessen, and Elon Musk to claim they’re not part of the so-called elite.

If a second Trump administration stymies financial regulators and gives cryptocurrency free rein, it could further contribute to the collapse of the U.S. economy that Bitcoin claimed to have averted. But it’s more likely that Trump will be happy to take the cryptocurrency money and run.

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