The Economist cover article: When cryptocurrency meets the Washington swamp

Source: Economist; Compiled by: AIMan@Golden Finance

Editorial: Cryptocurrency has become the ultimate swamp asset

An industry that dreams of transcending politics has now become synonymous with selfishness.

When the Qatari government proposed to replace Air Force One with a Boeing 747, President Donald Trump responded: Why not? Only a fool would refuse free money. No presidency in modern history has triggered so many conflicts of interest at such a fast pace. Yet the worst acts of self-interest in American politics are happening not on the runway but on the blockchain—home to trillions of dollars in cryptocurrency.

Over the past six months, cryptocurrencies have taken on a new role at the center of American public life. Some cabinet officials have invested heavily in digital assets. Cryptocurrency enthusiasts have participated in running regulatory agencies. The industry’s largest businesses are among the biggest donors to campaigns, and exchanges and issuers have poured hundreds of millions of dollars into defending friendly lawmakers and crushing opponents. The president’s sons have peddled their cryptocurrency investments around the world. The biggest investor in Trump’s meme coin had a chance to dine with the president. The first family’s crypto holdings are now worth billions of dollars, making cryptocurrencies perhaps the single largest source of their wealth.

That’s ironic, given the origins of cryptocurrencies. When Bitcoin was created in 2009, a utopian anti-authoritarian movement welcomed it. Early adopters of cryptocurrency had lofty goals to revolutionize the financial system and protect individuals from asset grabbing and inflation. They wanted to hand over power to small investors who would otherwise be beholden to large financial institutions. It was more than an asset; it was a technological liberation.

All that has been forgotten today. 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 to a greater degree than Wall Street or any other industry. Cryptocurrency has become the ultimate swamp asset.

This is in stark contrast to what is happening outside the United States. In recent years, jurisdictions as diverse as the European Union, Japan, Singapore, Switzerland, and the UAE have successfully brought new regulatory clarity to digital assets. These jurisdictions have done so without the rampant conflicts of interest that have characterized the United States. In developing countries, where government expropriation is rife, inflation is highest, and the risk of currency debasement is acute, cryptocurrency continues to play the role that early idealists envisioned.

All this is happening as the technology underlying digital assets matures. While there is still a lot of speculation, mainstream financial and technology companies are gradually taking cryptocurrencies seriously. The number of real-world assets, including private credit, U.S. Treasuries and commodities, that have been "tokenized" and traded on blockchains has almost tripled in the past 18 months. Traditional financial institutions such as BlackRock and Franklin Templeton are large issuers of tokenized money market funds. Cryptocurrency companies are also getting in on the action, issuing tokens pegged to assets such as gold.

Perhaps the most promising use is for payments companies. Some companies are embracing stablecoins (digital tokens backed by other, more traditional assets). In the past month alone, Mastercard announced that it would allow customers and merchants to use stablecoins for payments and settlements. 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 try again.

This is an opportunity that cryptocurrency companies should seize at their own risk. Supporters argue that they had no choice but to exhaust all avenues in the US when Joe Biden entered the White House. Under Gary Gensler, the US SEC has taken a dim view of the industry, embroiling many of the most prominent companies in enforcement actions and legal cases. Banks have been scared away from offering services to cryptocurrency companies and from getting involved in cryptocurrencies, 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, with most cases against cryptocurrency companies being dropped.

The upshot is that cryptocurrencies need to save themselves in the US. New rules still need to be written 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 detrimental. The danger of setting too few safeguards is not just theoretical. The three largest banks that collapsed in 2023 - Silvergate, Signature and Silicon Valley Bank - all had large exposure to floating deposits in the cryptocurrency industry. Stablecoins are vulnerable to runs and should be regulated like banks.

Without such changes, leading figures in the cryptocurrency space will eventually regret the deal they made in Washington. The industry has been mostly silent about the conflicts of interest raised by the Trump family’s cryptocurrency investments. Legislation is needed to clarify the status of industries and assets and provide crypto companies with the more rational regulatory security they have long desired. The interweaving of the president’s business interests with government affairs has already made that more difficult. On May 8, a cryptocurrency bill failed to pass a procedural vote in the Senate after several Democratic and three Republican senators withdrew their support.

Me, me, meme

No industry so closely tied to one political party is immune to the swings of American voters’ mood. The industry’s hailing of Trump as a savior and its emergence as a favored “swamp asset” show that it has chosen a side. Cryptocurrency is taking on a new role in policymaking. But now the industry’s reputation and fate are tied to the rise and fall of its political benefactors. Cryptocurrency has been good for the Trump family. But in the end, the benefits of this deal will only go one way.

Main text: The cryptocurrency industry has suddenly become the center of American politics

Thanks to the Trump family's investment, friendly regulators and generous election spending.

In late April, Fr8Tech, a Texas logistics company with a market value of about $3 million, launched an unusual investment. The company said it would borrow up to $20 million to buy TRUMP Meme Coin, a cryptocurrency launched by Donald Trump three days before he began his second presidential term. (He urged on social media: "Join my very special Trump community. Get your $TRUMP Coin now.") The company that manages TRUMP Coin just announced that the meme coin's largest investor will be invited to dinner with the president in late May. Javier Selgas, Fr8Tech's CEO, said buying the token would be an "effective way" to "advocate" for the trade policy Fr8Tech wants.

That same week, on the other side of the world, the night sky over the Pakistani megacity of Lahore lit up with fireworks. The Pakistan Cryptocurrency Council, set up by the finance minister in March to promote the “digital asset” industry, was celebrating a partnership with World Liberty Financial, or WLF, a company owned by Mr. Trump and his family. WLF pledged to help Pakistan develop blockchain products that convert real-world assets into digital tokens and to provide broader consulting on the cryptocurrency industry. Specific details of the agreement, including financial terms, were not disclosed. Indian media interpreted the deal as an effort by Pakistan to win Mr. Trump’s favor—an interpretation that became more awkward two weeks later when Mr. Trump took credit for a ceasefire in the rapidly escalating military conflict between India and Pakistan. Many Indians felt that the truce was too favorable to Pakistan.

The two events were signs of a change in Washington. Cryptocurrency was on the rise. The president, his wife and his children were promoting it at home and abroad. Regulators appointed by Mr. Trump were taking a more relaxed approach. Investors were piling in. Large pressure groups have sprung up to support political candidates who champion cryptocurrencies and punish those who oppose them. Investors and advocates, including foreign governments, have found that it offers access to well-connected people. The young industry has suddenly found itself at the heart of American public life. But its close ties to the Trump family have also turned it into something of a partisan cause. Trump's enthusiasm for cryptocurrencies may ultimately do more harm than good to the industry.

Many industries have become entangled with the political class over the years. Banks, arms manufacturers and big pharmaceutical companies have long maintained influence in the corridors of power. In the late 19th century, railroads wielded enormous influence over national and local politics, securing favorable regulations and facilitating a huge boom and a devastating bust.

Figure 1

But no industry has leapt from near-pariah status to official darling as quickly as cryptocurrencies. At the start of Mr. Trump’s first term, the total value of all cryptocurrencies in the world was less than $20 billion. Today it is more than $3 trillion (see Figure 1). When Mr. Trump nominated Jay Clayton to be chairman of the Securities and Exchange Commission (SEC) in 2017, cryptocurrencies were not mentioned at all during his Senate confirmation hearing. As recently as 2021, the president disdained digital assets. “Bitcoin looks like a scam,” he said of the largest cryptocurrency, “and I don’t like it because it’s another currency competing with the dollar.” His views seemed to be vindicated the following year, when a collapse in digital asset prices and an $8 billion fraud at FTX, a major cryptocurrency exchange, heralded a downturn in the industry known as the “crypto winter.”

Regulators have also taken a dim view of many crypto assets. Gary Gensler, the SEC chairman under Mr. Trump’s predecessor, President Joe Biden, insisted that many cryptocurrencies were actually securities and should therefore only be traded on exchanges regulated by the SEC. The agency promptly sued big cryptocurrency trading sites like Coinbase and Binance, as well as many other digital asset companies.

However, since Mr. Trump’s return to the White House, financial regulators that had tried to curb cryptocurrency during Mr. Biden’s administration have suddenly become keen to support it. That’s because Mr. Trump has appointed staunch believers to lead them. New SEC Chairman Paul Atkins served as co-chair of a crypto industry group for eight years. Brian Quintenz, Mr. Trump’s nominee for chairman of the Commodity Futures Trading Commission, another financial regulator, was previously the head of crypto policy at a16z, a prominent venture capital firm.

The change in 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 require regulation. Hester Peirce, who heads the commission’s newly formed crypto task force, is affectionately known in the industry as “Crypto Mom.” More than a dozen enforcement actions against crypto companies have been halted since Mr. Trump took office, including against two big exchanges, Coinbase and crypto.com, against Ripple Labs, the issuer of one of the largest cryptocurrencies, and against Kraken, the first crypto company to receive a state banking charter. All of this has naturally boosted the industry: venture capital funds invested nearly $5 billion in crypto companies in the first three months of 2025, the highest amount in nearly three years.

Major regulatory reversals are not unheard of when a new president takes office and installs like-minded officials. When Republican administrations replace Democratic ones, the pendulum often swings from intervention to laissez-faire. What is unusual, however, is the president and his family’s deep involvement in an industry that has benefited from deregulation.

The presidential family’s investment in cryptocurrency has grown from a fledgling venture just a few months ago. WLF, a company in which the Trump family holds a 60% stake, was founded in September 2024. The company announced a new stablecoin (a cryptocurrency pegged to the value of another asset, usually the U.S. dollar) in March 2025. The token, called USD1, has a market capitalization of more than $2 billion, making it one of the world’s largest dollar-pegged cryptocurrencies.

Steve Witkoff, Mr. Trump’s chief foreign policy “operator,” is WLF’s “honorary co-founder”; 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 warns: “Any mention, reference, or imagery associated with Donald J. Trump or members of his family should not be construed as an endorsement.” A spokesman said WLF is a private company with no political affiliation and no one from the Trump administration serves on its management.

In addition to WLF, Mr. Trump owns other crypto assets. There’s the TRUMP Meme coin, a cryptocurrency created to capitalize on a trend or joke, whose value soared after its Jan. 17 launch, peaking at about $15 billion before plunging to a fraction of that figure. Companies associated with the Trump family own 80% of these tokens. Melania Trump, the first lady of the first lady, launched another meme coin on January 19. Its value also soared and then collapsed (see Figure 2). The president also has a direct financial interest in cryptocurrencies through Trump Media & Technology Group, a social media company in which Trump owns 52%. In April, Trump Media & Technology Group announced a partnership with Crypto.com (a company whose case was recently dropped by the SEC) to sell exchange-traded funds (ETFs) involving digital assets and other securities. Trump Media & Technology Group said it is also considering launching its own crypto wallet and currency.

Figure 3

The volatility of these assets and the uncertainty of ownership make it difficult to determine how much of the Trump family's wealth is tied up in these investments. Cryptocurrency may now constitute the family's largest single line of business. The family’s holdings of TRUMP Memecoin alone are worth nearly $2 billion, not far off all of its properties, golf courses and clubs combined(see Figure 3).

It’s not just the Trump family that has helped revive cryptocurrencies. Large election pressure groups, known in the jargon as super PACs, have been spending heavily to promote the interests of the industry. A network of linked super PACs, Protect Progress, Fairshake and Defend American Jobs, spent more than $130 million in the run-up to last year’s election, making them among the top spenders on the campaign trail. All were formed after the last presidential election. With $260 million in revenue in the last election cycle, Fairshake is not only the largest PAC advocating for a specific industry, but also the largest nonpartisan super PAC of any type. By comparison, the National Association of Realtors raised about $20 million. Ripple and Coinbase are Fairshake’s largest corporate donors, while Marc Andreessen and Ben Horowitz of Andreessen Horowitz are the largest individual donors.

Fairshake doesn’t emphasize candidates’ views on cryptocurrencies, instead running ads on any issue that could boost a politician it favors or hinder one it doesn’t like. It used one ad to criticize California Democratic Congresswoman Katie Porter for trying to sell her campaign donor list, helping her defeat in the California Senate primary. Another ad supporting New York Rep. Pat Ryan praised his tough stance on crime. “Many industries have tried this. The difference is its singular focus, and that’s what really changes the game,” said Josh Vlasto, a spokesman for Fairshake. “The founding strategy was and remains so today: Support the supporters and oppose the opponents.”

“This is the most naked display of money and power in the legislature that I have ever seen,” said Amanda Fischer, chief operating officer of Better Markets, a lobbying group that advocates for tighter U.S. financial regulation. Ms. Fischer was also chief of staff to Gensler, the SEC chairman under Biden. Fairshake alone has $116 million in cash on hand, ready to deploy in the 2026 midterm elections.

The crypto industry’s formidable war chest should help it persuade Congress to adopt its preferred policies. Most importantly, it wants Congress to clarify the legal status of crypto assets to prevent the regulatory pendulum from swinging away again in future elections. After all, presidents and their appointees come and go; legislation tends to be more enduring.

The crypto industry’s preference is for most cryptocurrencies to be declared commodities, regulated by the Commodity Futures Trading Commission (CFTC), rather than regulated as securities by the SEC. The CFTC oversees trading in most financial derivatives and is the much smaller of the two regulators. For the current fiscal year, it requested a budget of $399 million and 725 full-time employees, compared with $2.6 billion and 5,073 employees for the SEC. The crypto industry sees it as a lighter approach to regulation.

A bill to make the CFTC the main regulator of cryptocurrencies stalled in Congress last year. But Republicans, who favor lighter financial regulation, have controlled both chambers since January. What's more, many Democrats recognize the benefits of putting crypto assets on a clearer legal footing. However, the Trump family's crypto enthusiasm is making it harder for the industry to win enough support in Congress.

Mr. Trump's apparent conflict of interest has sparked a wave of criticism from Democratic lawmakers. They argue that many investors do business with the Trump family or buy Trump-related crypto assets simply to curry favor with the president. In effect, they are accusing Mr. Trump of power-peddling. For example, they point to the surge in the price of the TRUMP Meme coin after the announcement of a dinner with Mr. Trump for big investors. Another furor involved the decision by MGX, an investment company set up by the Abu Dhabi government, to use WLF’s USD1 as a vehicle for a $2 billion investment in Binance. Using a cryptocurrency to finance such a large investment is itself unusual. The business logic of using such a new and untested cryptocurrency is even less clear. But WLF benefited greatly from it: the deal catapulted USD1 from obscurity to become the world’s seventh-largest stablecoin.

On May 8, a bipartisan bill to create a clear regulatory framework for stablecoins failed to gain Senate approval. The bill’s advocates had been confident that it would pass. But Democrats, who had previously seemed positive about it, began to worry that it could encourage what they saw as influence peddling by the president. Two Democratic senators, Jeff Merkley and Chuck Schumer, introduced a bill that would prevent the president, members of Congress and senior White House officials from issuing, sponsoring or endorsing crypto assets. Even Republican Senator Cynthia Lummis, who has been a vocal advocate for clear cryptocurrency regulation and is a co-sponsor of the bill, told NBC that Mr. Trump’s Memecoin dinner “gives me pause.”

Concerns about cryptocurrency regulation are not limited to the president’s ties to the industry. Steven Kelly of the Yale Financial Stability Project (part of Yale University) argues that a fast-growing crypto industry overseen by a small, hands-off regulator could pose a risk to financial stability. He noted that cryptocurrencies were at the heart of the crisis that rocked the U.S. banking industry in 2023. The banks where the crisis began — Silvergate, Silicon Valley and Signature — did a lot of business with crypto companies and investors, and were hit hard by the crypto winter. When concerns about their losses turned into a run, panic quickly spread to the broader financial system. For skeptical analysts, normalizing the use of volatile crypto assets is bound to inject greater danger into the financial system. Another Democratic senator, Elizabeth Warren, said the stablecoin bill would increase the risk of a financial collapse.

Publicly, cryptocurrency advocates remain optimistic that the industry will receive supportive legislation. Privately, however, some industry leaders have been harshly critical of the president’s crypto ventures. They worry that the appearance that the industry has become a tool for the president to peddle influence will discourage lawmakers from supporting favorable legislation. Nic Carter, a prominent crypto investor and supporter of Mr. Trump, is one of the few people willing to say publicly that the president’s family’s financial interests in the industry are making it harder to pass crypto-friendly legislation. He said the White House does not respond well to such criticism. “I’ve had people in the Trump administration contact me when I’ve spoken about it and have been unhappy about it.” However, trying to silence those who state the obvious is unlikely to work. “The conflict is real,” Mr. Carter said. “No one can really dispute it.”