A federal crypto reserve would only benefit the scoundrels and crooks who helped fund Trump’s presidential campaign.
Donald Trump speaks at the Bitcoin 2024 conference on July 27, 2024. in Nashville, Tennessee.
(Mark Humphrey/AP Photo)
President-elect Donald Trump’s promise to create a federal crypto reserve is a terrible idea. The most striking evidence was the cryptomarkets themselves, which saw the price of bitcoins rocket to six figures after Trump appointed a raft of crypto accelerators for the incoming administration and amid speculation that the federal government will soon hoard mined data tokens.
The theory behind the foreign exchange reserve is that it serves as a hedge against inflation. From this perspective, gains in the crypto market could help ease price pressures in the real sector of the economy as government reserves grow faster than inflation. But the rise in asset prices to unprecedented heights on the mere possibility that they could become part of the US Treasury suggests that it is less a store of long-term value than a fickle trinket for speculators and con artists. Indeed, crypto’s extreme volatility is the cause of ongoing market manipulation, of the kind made infamous by now-jailed crypto-defender Sam Bankman-Fried: when an asset doesn’t generate economic value on its own, volume traders who build markets around it must command a an extensive infrastructure of smoke and mirrors to mask the dirty secret of his utter uselessness. That’s why, amid the pre-holiday fever of crypto speculation, news has emerged that North Korean hackers have developed Theft of $308 million in holdings from crypto broker DMM Bitcoin this spring — a theft that forced the company to shut down earlier this month.
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Despite,, all the ritualized commitments of the crypto sector to ensure greater transparency and honesty in currency exchanges, this kind of shake-up remains a feature of crypto trading. Like Jacob Silverman and James Block reported for Nation Fraud is endemic in the crypto market earlier this year, so when Colorado Governor Jared Polis announced that his state would serve as a model for loosely regulated crypto trading, the state was immediately flooded with crypto brokers flaunting the nameplates of foreign joint-stock companies , and which then disappeared altogether when the deals they set up were revealed bot-led boot and reset schemes.
These shady and predatory aspects of crypto trading were the main reason why the head of the Biden administration’s Security and Exchange Commission, Gary Gensler aggressively pursued crypto abuse and strengthened regulatory oversight of the sector. (The initial surge in crypto prices last fiscal quarter began with Gensler’s post-election announcement that he would resigns in January— again demonstrating that it’s a poor candidate for a safe-haven currency that moves into speculative growth the moment regulatory oversight is eased.) Indeed, crypto’s track record in preventing financial fraud has been so dismal that even Trump denounced it as a scam in 2021.
So how did this fraud-prone, priceless asset become the vanguard of the Trump administration’s financial agenda? The answer, of course, is in money, namely in the traditional transactional mobilization of dollars to attract political support from above. This transformation began with Trump’s forays into crypto-promotion; as a serial con man, the presidential standard-bearer of the Republican Party joined forces with World Liberty Financiala crypto clearinghouse promoted by his sons Eric and Donald Jr. (Earlier this month, the company received a $30 million investment from crypto billionaire Justin Sun, who is facing SEC fraud charges and was recently in the news for him Buying a $6.2 million banana as a conceptual work of art; Sun’s investment could result in an eight-figure return for the Trump-controlled company, depending on the terms of the deal.)
With crypto market share growing, Trump began touting plans to turn the United States into the center of the global crypto economy during his second term. And crypto fans responded enthusiastically; crypto has been the primary source of election funding throughout the 2024 cycle, starting over $230 million across all campaignsat the same time, Trump’s campaign has a turnover of about 22 million dollars. Crypto-focused super PACs have successfully fought the industry’s critics in Congress, such as Sen. Sherrod Brown of Ohio, Rep. Cathy Porter of California, and Rep. Jamal Bowman of New York, all Democrats. Unsurprisingly, Trump’s new cabinet is filled with crypto allies. His pick for Commerce Secretary Howard Lutnick has long fueled Wall Street’s crypto woes; his investment bank Cantor Fitzgerald owns a 5 percent stake in crypto platform Tether, which has attracted loyal cheater fan base and money launderers, according to a recent UN report. Trump also announced plans to replace outgoing SEC chief Gensler with Paul Atkins, a financial adviser who called for the regulator to be “more agreeable” to crypto interests. (And yes, it was the news of Atkins’ selection that pushed bitcoin past the $100,000 mark.) Steven Miron, Trump’s nominee to head the Council of Economic Advisers, also gung ho on crypto and a critic of regulatory constraints on the industry. Trump also named David Sachs ultimately trusting the right venture capitalist to be his”crypto and AI car.”
So Trump’s plan to create a national crypto sanctuary isn’t so much a case study in economic policymaking as it is a garden-variety brand of backshish to go with it. pledge to oil and gas billionaires to allow them to submit their own deregulation wish list in exchange for their campaign contributions. Of course, with other elements of Trump’s economic agenda — from tariff-driven trade policies to gratuitous tax cuts for the rich — sure to create an inflationary effect, the incoming president has reasons beyond his own stake in crypto to hope that crypto will continue to add in value and give the US Treasury a windfall to cover a number of new debt obligations. However, like virtually every other Trump-branded asset in the presidential portfolio, crypto can’t meet this comically extreme demand for the simple reason that it doesn’t create anything useful.
Still, perhaps a new class of investors ready to be ripped off from the federally-backed crypto boom can find some solace in looking at Ecclesiastes 5:14 in their Trump Bibles, where the author asks how the owners of “senseless” assets benefit. objects. benefits “except to admire them.”
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