Original source: New Knowledge Collection
Source: Dichao
Crypto has become the ultimate swamp asset
An industry that once dreamed of being above politics has now become synonymous with abusing public power for personal gain.
Cryptocurrencies floating in the Washington, D.C., quagmire. Photo credit: Peter Crowther/Getty Images
May 17, 2025
When the Qatari government proposed replacing Air Force One with a Boeing 747, President Donald Trump responded: Why not? Only a fool would turn down free money. No presidency in modern history has produced so many conflicts of interest so quickly. Yet the worst self-dealing in American politics is happening not on the runway but on the blockchain, home to trillions of dollars worth of cryptocurrencies.
Over the past six months, cryptocurrencies have assumed a new role at the heart of American public life. Several cabinet officials have large investments in digital assets. Cryptocurrency enthusiasts are involved in running regulatory agencies. The industry’s biggest businesses are among the biggest donors to campaigns, with exchanges and issuers pouring hundreds of millions of dollars into supporting friendly lawmakers and defeating their opponents. The president’s sons peddle their cryptocurrency ventures around the world. The biggest investor in Trump’s meme coin has dinner with the president. The first family’s assets are now worth billions of dollars, making cryptocurrency perhaps the single largest source of its wealth.
This is ironic, given the origins of cryptocurrency. When Bitcoin was created in 2009, a utopian, anti-authority movement welcomed it. Crypto’s earliest adopters had lofty goals of revolutionizing finance and protecting individuals from confiscation and inflation. They wanted to put power in the hands of small investors who would otherwise be at the mercy of large financial institutions. This was more than just an asset: It was a liberating technology.
Now, all of that has been forgotten. Cryptocurrencies have not only facilitated fraud, money laundering, and other types of financial crime on a massive scale. The industry has also developed a sordid relationship with the executive branch of the U.S. government that exceeds that of Wall Street or any other industry. Cryptocurrencies have become the ultimate “political mud” asset.
This is in stark contrast to the situation outside the United States. In recent years, jurisdictions as diverse as the European Union, Japan, Singapore, Switzerland, and the UAE have all successfully provided new regulatory clarity for digital assets. They have done so without the same rampant conflicts of interest. In parts of the developing world where government expropriation of property is common, inflation is at its highest, and the risk of currency debasement is real, cryptocurrency still plays a certain role that early idealists once hoped it would play.
All of this is happening as the technology underlying digital assets matures. There’s still plenty of speculation. But cryptocurrencies are gradually being taken more seriously by mainstream financial firms and technology companies. The number of real-world assets, including private credit, U.S. Treasuries and commodities, being “tokenized” so they can be traded on blockchains has nearly tripled in the past 18 months. Traditional financial institutions like BlackRock and Franklin Templeton are big issuers of tokenized money-market funds. Crypto companies are also getting in on the action, offering tokens pegged to assets like gold.
Perhaps the most promising use is for payment companies. Some companies are accepting stablecoins (digital tokens backed by other more traditional assets). In the past month alone, Mastercard said it would allow customers and merchants to pay and settle transactions with stablecoins. Fintech company Stripe has launched stablecoin financial accounts in 101 countries. Stripe also acquired stablecoin platform Bridge this year. Three years after abandoning the Diem project, Meta may be dipping its toes into the water again.
This is an opportunity that crypto companies are in danger of missing out on. Supporters argue that they have no choice but to resort to underhand tactics in the United States when Joe Biden is in the White House. Under Gary Gensler, the SEC has taken a negative view of the industry, embroiling many of the best-known companies in enforcement actions and legal cases. Banks are afraid to serve crypto companies or get involved in the cryptocurrency space, especially stablecoins. In this sense, the industry has a point. Clarifying the legal status of cryptocurrencies through the courts rather than Congress is neither particularly effective nor always fair. The regulatory pendulum has now swung sharply in the opposite direction, and most cases against crypto companies have been abandoned.
The upshot is that in the United States, cryptocurrencies need to redeem themselves. New rules are still needed to ensure that risks are not injected into the financial system. If politicians fail to properly regulate cryptocurrencies because they fear the industry’s electoral influence, the long-term consequences will be pernicious. The dangers of not putting adequate protections in place are not just theoretical. The three largest banks that collapsed in 2023—Silvergate, Signature, and Silicon Valley—all had large exposures to volatile deposits in the cryptocurrency industry. Stablecoins are vulnerable to runs and should be regulated like banks.
Without such reforms, leading figures in cryptocurrency will regret the deal they made in Washington. The industry has remained largely silent about the gimmicky conflicts of interest raised by the Trump family’s cryptocurrency investments. Legislation is needed to clarify the status of the industry and assets to provide the regulatory assurances that smarter cryptocurrency companies have long wanted. The president’s conflation of business interests with government affairs has made that more difficult. On May 8, a cryptocurrency bill in the Senate failed to advance in a procedural vote after many Democratic senators, as well as three Republican senators, withdrew their support.
Self, self, emoji
No industry so closely tied to one political party is immune to the swings of American voters’ mood. In hailing Mr. Trump as a savior and becoming a favored “political quagmire” asset, the industry has picked sides. Cryptocurrency has a new role at the policymaking table. But the industry’s reputation and fate are now tied to the rise and fall of its political sponsors. Cryptocurrency has been good to the Trump family. But ultimately, the benefits of this deal will only flow one way.
