Original title: "Trump's Dangerous Embrace of Bitcoin and the Crypto Bros"
By John Cassidy, The New Yorker
Compiled by: BitpushNews Scott Liu
In politics, a single month can mean a huge difference. As the prosaic Democratic presidential race became “The Kamala Harris Show,” Donald Trump’s reelection campaign became “ After J.D. Vance, a venture capitalist and cryptocurrency supporter, became his running mate, Trump appeared at a Bitcoin conference in Nashville, promising to build a strategic Bitcoin reserve and make the United States the global Bitcoin superpower. He also promised to fire Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), a staunch opponent of cryptocurrencies who has criticized the crypto industry for its "record of failure, fraud and bankruptcy."
Trump's move is ironic, as he said in 2019 that the value of Bitcoin is illusory. According to CNBC, the event in Nashville was attended by the Winklevoss twins and Kid Rock. Dozens of cryptocurrency supporters paid $500,000 each for a private roundtable with the former president. Days later, a company owned by Trump listed a limited edition coin online with the words “TRUMP CRYPTO PRESIDENT” and the words “TRUMP CRYPTO PRESIDENT” printed on it. The shoes, which were emblazoned with the words "Style of the Future" in gold, were sold for $500 a pair. (The shoes subsequently reportedly sold on eBay for as much as $25,000, with one shoe listed for as much as $69,999.)
In recent years, the cryptocurrency industry has faced a crisis. In December 2022, Sam Bankman-Freed, the founder of the cryptocurrency exchange FTX, was arrested for defrauding FTX customers of more than $1.7 billion and was subsequently sentenced to 25 years in prison. In November 2023, CZ, founder and CEO of Binance, the world’s largest cryptocurrency exchange, pleaded guilty to failing to combat money laundering and was sentenced to four months in prison.
The bigger threat to the cryptocurrency industry comes from Gensler and his call for regulation of many crypto assets as investment securities, which would subject them to strict investor protection laws and government oversight. Investing in cryptocurrencies is more like buying commodities, such as precious metals and beef brisket, which should be regulated by the Commodity Futures Trading Commission (CFTC) rather than the larger SEC, the Securities and Exchange Commission (SEC) has argued.
In September 2022, Gensler said in a speech in Washington that he believed the “vast majority” of cryptocurrency tokens were securities, quoting the agency’s first head, Joseph Kennedy: “The SEC will make it so that no one can In the following months, the SEC sued a number of leading cryptocurrency companies, including Binance and Coinbase, the largest cryptocurrency exchange in the United States, accusing them of operating unregistered securities exchanges and other Although the defendant companies have denied any wrongdoing and sought to have the cases dismissed before trial, a federal judge in New York ruled in March that most of Coinbase’s cases could proceed. In June, a federal judge in Washington, D.C. The judge also said most of Binance’s cases can proceed. In December, a federal judge in New York determined that four cryptocurrency tokens sold by South Korean cryptocurrency company Terraform Labs were securities.
The SEC has also suffered a setback on this key issue. In July 2023, a federal court in California ruled that the XRP token created by San Francisco cryptocurrency company Ripple Labs was not a security when it was sold publicly. In June of this year, the SEC ended its The SEC is also investigating Ethereum, the second-largest blockchain network after Bitcoin. But overall, the SEC is making progress. “Cryptocurrencies are becoming more and more popular,” said Dennis Kelleher, president of public interest group Better Markets. People in the industry are doubling their political donations. The biggest appeal of the cryptocurrency industry is for Congress to rule that digital assets are not securities, so that the SEC has no jurisdiction."
The scale of donations in the cryptocurrency industry is staggering. According to Bloomberg, three cryptocurrency political action committees (PACs), including the largest Fairshake, have raised 170 million from donors such as Coinbase, Ripple, and venture capital firm Andreessen Horowitz. Tens of millions of dollars in cryptocurrency have flowed not only to Trump’s presidential campaign, but also to House and Senate races. And much of the money appears to be aimed at defeating Democrats who have criticized cryptocurrency, including Ohio Senator Sherrod Brown and Sen. John Tester of Montana, and some of the money also went to other Democrats.
In last week’s primary for Arizona’s 3rd District, Yassamin Ansari, a Democratic member of the Phoenix City Council, defeated former state Democratic Party Chair Raquel Teran with the help of a PAC-funded ad. More than a dozen House Democrats recently wrote a letter to Democratic National Committee Chairman Jaime Harrison, asking the committee to "take a future-oriented approach to digital assets and blockchain technology." However, the fact remains that the cryptocurrency industry's largest political The supporters are Republicans.
After Trump’s appearance at a recent Bitcoin conference, Wyoming Senator Cynthia Loomis announced that she would introduce legislation to create a “Bitcoin Strategic Reserve” consisting of approximately one million Bitcoins. (Another Cryptocurrency supporter Robert Kennedy Jr. is cheering.) The dark humor is that many in the cryptocurrency community are self-proclaimed libertarians who often argue that one of the great things about Bitcoin is its independence from government. And now, a Republican senator is proposing to spend more than $60 billion in taxpayer money (given Bitcoin’s current price) to acquire about 5% of all cryptocurrency in existence.
Trump has a more modest proposal that the U.S. government simply hold all the bitcoins seized by law enforcement agencies. What are the economic benefits of holding these bitcoins? James Angell, a financial economist at Georgetown University, James Angel said: "The biggest benefit is that it will make the largest user of Bitcoin vote for Trump."
Many cryptocurrency practitioners would certainly benefit if the U.S. government gave Bitcoin and other crypto assets recognition, but the industry's main goal is to bring crypto assets into the mainstream investment world while maintaining as little regulation as possible. Kelleher said, "We have seen In 2000, the U.S. Congress passed the Commodity Futures Modernization Act, which effectively exempted certain financial derivatives, contracts whose value is tied to the price of an underlying asset, from regulation. In the years that followed, The issuance of mortgage derivatives, such as credit default swaps, increased dramatically. The ultimate financial collapse of many large banks was due to these derivatives. When the housing market collapsed, the value of the underlying mortgage securities collapsed, and the entire financial system collapsed. This ultimately led to a bailout using taxpayer money.
The most powerful rebuttal to the potential risks of cryptocurrencies may be that a collapse in digital asset prices would have little impact on the broader financial system. (In 2021 and 2022, Bitcoin’s value fell by more than two-thirds.) But As Kelleher points out, that crash occurred in an environment where regulators insisted on keeping cryptocurrencies and crypto assets isolated from the financial system. “Imagine if the crash had occurred when cryptocurrencies were deregulated and fully integrated and connected to the financial system,” Kelleher said. In the case of a banking system, there would be countless derivatives whose value is tied to the price of Bitcoin, and these liabilities would be spread across the banks’ balance sheets. Then we would be back to the 2008 situation.”
This may be a worst-case scenario, but the bigger problem is this: We have already seen the dangers of lax financial regulation. Mortgage securities at least serve a larger social group, such as expanding homeownership. Even if someone discovers crypto assets But don’t tell this Mar-a-Lago cryptocurrency believer that. He still has to raise money for his campaign and Selling sports shoes.
