Crypto Assets: The Shift from Marginal Revolution to Political Center

Editorial: Crypto Assets as the Intersection of Power and Interests

What began as an industry that wanted to transcend political constraints has now become synonymous with entanglement of interests.

The recent political arena in the United States has sparked an unprecedented wave of conflicts of interest, and its core lies not in the corridors of power, but in the blockchain field—the habitat of trillions of dollars in Crypto Assets.

In the past six months, Crypto Assets have played an unprecedented role in public life in the United States. Cabinet members have invested heavily in digital assets, industry enthusiasts are involved in regulatory management, and major exchanges have invested significant amounts to support friendly legislators and combat opponents. The president’s family promotes its Crypto Assets investment globally, with the value of its held crypto assets reaching billions of dollars, potentially becoming the largest source of its wealth.

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This phenomenon stands in stark contrast to the origins of Crypto Assets. When Bitcoin was born in 2009, it was embraced by a utopian anti-authoritarian movement. Early adopters held lofty goals, hoping to completely reform the financial system, protect individuals from asset plunder and inflation, and shift power from large financial institutions to small investors. This was not just an asset, but a movement for technological liberation.

This vision has now been forgotten. Crypto Assets have not only fueled large-scale fraud, money laundering, and financial crime but have also formed an unprecedented close relationship with government administrative departments, to a greater extent than Wall Street or any other industry.

In stark contrast, regions such as the EU, Japan, Singapore, Switzerland, and the UAE have successfully provided new regulatory transparency for digital assets without similar conflicts of interest. In developing countries, especially those where governments impose widespread taxation, inflation rates are high, and there is a severe risk of currency devaluation, Crypto Assets continue to play the role anticipated by early idealists.

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At the same time, the underlying technology of digital assets is maturing. Over the past 18 months, the number of physical assets such as private credit, government bonds, and commodities that have been “tokenized” and traded on the blockchain has nearly doubled. Traditional financial institutions are actively participating in the issuance of tokenized money market funds, and Crypto Assets companies are also launching tokens linked to assets such as gold.

The payment sector shows the greatest potential. Many companies are embracing stablecoins backed by traditional assets. Mastercard has announced that it will allow customers and merchants to use stablecoins for payment settlements, fintech companies are launching stablecoin financial accounts globally, and even tech giants may return to the digital currency space.

For the industry, this is both an opportunity and a challenge. The dramatic changes in the current regulatory environment have brought uncertainty, and the close ties between Crypto Assets and specific political forces may expose them to long-term risks. Without an appropriate regulatory framework, the financial system may face potential risks, as demonstrated by the 2023 banking crisis.

Crypto Assets have chosen a path of political self-rescue, but the end of this path may not be what the industry desires. The close ties with specific political forces make its reputation and fate closely linked to political trends. This relationship currently seems beneficial for the industry, but in the long run, this one-sided transaction may bring more uncertainty.

Crypto Assets industry has risen to the core of American politics

Recently, the Crypto Assets industry has rapidly ascended from the margins to become a central player on the American political stage. This shift is driven by changes in regulatory attitudes, significant political investments, and high-level industry participation.

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In April this year, a Texas logistics company valued at only $3 million announced that it would borrow up to $20 million to purchase TRUMP Meme coin—a newly launched Crypto Asset. The company’s CEO stated that this is an “effective way” to “advocate” for its desired trade policies. Meanwhile, in Lahore, Pakistan, the newly established Crypto Asset committee of the Ministry of Finance is celebrating a partnership with a financial company linked to the presidential family, which has pledged to help Pakistan develop blockchain products.

These events mark a significant shift in Washington’s policy direction. The Crypto Assets industry is experiencing an unprecedented rise, from regulatory easing to strong support from senior officials, from an investment boom to the massive emergence of pressure groups, this young industry has suddenly become the focus of public life.

Throughout history, many industries have been closely intertwined with political power. In the late 19th century, railroads exerted tremendous influence on politics, leading to significant fluctuations between prosperity and depression. However, the cryptocurrency industry’s remarkable leap from the margins to becoming a darling is particularly noteworthy.

Just a few years ago, the total value of global Crypto Assets was less than 20 billion dollars, and now it has surpassed 3 trillion dollars. The regulatory attitude has also made a 180-degree turn, shifting from skepticism and repression to active embrace. Many newly appointed heads of regulatory agencies have backgrounds in the Crypto Assets industry, and regulatory policies have shifted dramatically, with numerous enforcement actions against the industry being halted.

With the improvement of the regulatory environment, venture capital has rapidly flowed in, investing nearly $5 billion in crypto companies in the first three months of this year, reaching the highest level in nearly three years. At the same time, the presidential family’s investments in the Crypto Assets sector have rapidly expanded, including holding a large stake in stablecoin projects and Meme coin assets.

The value of these assets fluctuates greatly and is difficult to assess accurately, but it is estimated that Crypto Assets may now constitute the largest single business line of the presidential family, with the value of the Meme coin held by the family alone approaching $2 billion, which is comparable to the total of all their real estate, golf courses, and clubs.

In addition to direct investments, the encryption industry has also heavily invested in political activities through large election pressure groups. Several affiliated super political action committees spent over $130 million in the last election cycle, with one becoming the largest nonpartisan super PAC of all time, having $260 million in revenue. These funds were used to support industry-friendly politicians or to oppose candidates seen as unfavorable to the industry.

The main policy goal of the industry is to clearly define the legal status of Crypto Assets through legislation, hoping to classify most coins as commodities regulated by the Commodity Futures Trading Commission (CFTC), rather than as securities regulated by the larger and more strictly regulated Securities and Exchange Commission (SEC).

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However, the close ties between the presidential family and the Crypto Assets industry have raised concerns about conflicts of interest. Critics point out that many investors trading or purchasing related Crypto Assets with the presidential family may be doing so merely to seek political influence. Particularly after the announcement of hosting a dinner with the president for major investors, the subsequent surge in the prices of related Meme coins, as well as a foreign government investment company’s decision to make large investments using stablecoins associated with the presidential family, have intensified these concerns.

These controversies have affected the legislative process. A bipartisan bill aimed at creating a clear regulatory framework for stablecoins failed to pass in the Senate, partly due to concerns among Democrats that it might encourage political influence trading. Some lawmakers even proposed a bill aimed at preventing the president and senior officials from issuing or endorsing Crypto Assets.

Experts warn that the lack of proper regulation in the crypto assets industry could pose a risk to financial stability. The starting point of the 2023 banking crisis in the United States was several banks that had significant business dealings with crypto companies. When concerns over their losses evolved into a bank run, panic quickly spread to the broader financial system.

Although cryptocurrency advocates maintain optimism in public settings, believing that the industry will receive supportive legislation, some industry leaders privately criticize the president’s investments in crypto assets. They are concerned that the president’s family’s financial interests in the crypto industry will make it harder for lawmakers to support favorable regulatory frameworks, thereby hindering the industry’s long-term healthy development.

As an industry investor said: “Conflicts of interest are real, and no one can truly dispute this.”