The Trump administration is facing mounting pressure to reconsider its all-bark-no-bite crypto approach. Critics have raised alarm on potential conflicts of interest as the Trump family expands its ties to the growing digital asset industry. These recent efforts to relax scrutiny altogether have alarmed some of the nation’s most powerful Democrats and ethics watchdogs. They decry the family’s increasingly extravagant financial gambles in crypto businesses, foreboding the harms to individual investors and the potential risks to our financial system’s core.
These concerns have been compounded by a storm of confusion from three main developments. These include the Department of Justice's (DOJ) disbanding of a national cryptocurrency enforcement team, the Securities and Exchange Commission's (SEC) dropped enforcement actions against crypto firms tied to Trump donors, and the Trump family's increasing investments in the crypto space.
Earlier in April, the DOJ also announced the disbanding of its national cryptocurrency enforcement team, which had been created in 2022. The team’s record is impressive, with some high-profile and precedent-setting cases against North Korean hackers and other crypto criminals. In a related development, the DOJ also made clear that it’s not the “digital assets regulator.” A pro-crypto executive order from Trump, signed in January, contributed to their hasty choice.
The SEC has also recently dropped enforcement actions against crypto companies tied to Trump donors. On top of that, they’ve released explicit new guidance that could shield the Trump family’s personal coins from oversight. These actions led the administration to be accused of critics have said that it does so largely at the behest of the crypto industry and its allies while failing to protect investors.
The Trump family’s involvement with the secular crypto industry has recently received attention as well. World Liberty Financial, which has a kind of financial interest in the company, is tied to the Trump family. The Trump Organization has partnered with Crypto.com, one of the biggest cryptocurrency trading platforms. Combined, they will provide investment products closely tied to cryptocurrency.
These investments, the critics warn, bring such conflicts of interest to an entirely new plane. To mitigate these fears, the Trump family has brought on a new lawyer to serve as an outside ethics adviser.
This will, if successful, Trump has made a number of public overtures sounding positive on cryptocurrency. He told executives that he favored “simple, commonsense rules” for stablecoins. He further appended that these stablecoins would “increase the internationalization of the US dollar.”
"Many of you have been fighting for years for this." - Donald Trump
"Crypto is one of those things we have to do. Whether we like it or not, I have to do it." - Donald Trump
These statements, combined with the administration's actions to loosen crypto oversight, have led to accusations that Trump is using his position to benefit his family's financial interests.
House and Senate Democrats are issuing alarm bells on the perils of Trump’s conflicts of interest and relaxing crypto oversight. Senator Elizabeth Warren, perhaps the administration’s loudest critic on cryptocurrency, has repeatedly criticized the administration’s approach.
"It will mean opening the door for more fraud, more pump-and-dump schemes, and more financial instability that puts everyday Americans at risk." - Elizabeth Warren
"Donald Trump is enriching himself and his family through their crypto businesses while his administration guts oversight of the market." - Elizabeth Warren
"It's a massive conflict of interest and a recipe for disaster." - Elizabeth Warren
Eswar Prasad, a senior fellow at the Brookings Institution, said:
"Trump and his family are clearly eager to establish a broad foothold in the sector prior to further regulatory actions that are likely to boost crypto asset valuations." - Eswar Prasad
"Such investments by the Trump family take potential conflicts of interest to an altogether new level." - Eswar Prasad
Kedric Payne is vice president of legal affairs and senior director of ethics at Campaign Legal Center. He pointed out that presidents usually go out of their way to avoid the appearance of a conflict of interest.
"Presidents traditionally try to avoid even the appearance of conflicts of interest." - Kedric Payne
"Trump's connection to the crypto industry is much more than the appearance of a conflict. His financial interests in crypto are a clear and present conflict because he is personally championing laws to promote the industry." - Kedric Payne
"Voters have a right to know that the president cares more about the ethical integrity of the office than profiting from his own policies." - Kedric Payne
The administration's defenders argue that its approach to cryptocurrency regulation is aimed at fostering innovation and economic growth. They argue that the current regulatory paradigm is antiquated and hamstrings the advancement of emerging technologies.
Trump has appointed his industry allies from the crypto sector to run the Securities and Exchange Commission. He’s named a “czar” for both crypto and AI who has moved quickly to roll back industry oversight.
The discussion around how cryptocurrency should be regulated has been intense and will continue to be as the technology and industry develop and expand. Because the stakes couldn’t be higher. Policymakers have a pivotal role to play in determining whether and how those innovations will be harnessed to create a better financial system.
