Trump says ‘war on crypto is over’ but leaves tech bros wanting more

It was also a visceral testament to the power of money in politics. FairShake, a political action committee funded by the industry’s top executives and companies, ploughed more than $250 million (£194 million) into the Trump campaign and other pro-crypto candidates, making it the country’s single-biggest political donor after Elon Musk.

That avalanche of cash may also have fuelled Trump’s conversion from crypto sceptic — he once said bitcoin was “based on thin air” — to an avid supporter who has pledged to turn America into a “crypto capital” while also launching his own widely lucrative, and unregulated, digital currencies. After his November election win, bitcoin surged from $74,000 to more than $100,000 per coin, but has fallen in recent weeks.

Brian Armstrong, the billionaire founder of Coinbase, America’s largest crypto exchange, spearheaded the lobbying blitz and attended the summit. He said: “My goal in attending this is really just, first of all, to thank President Trump for helping make the United States the crypto capital of the world. I think he’s lived up to that campaign promise so far, and we’ve seen a lot of work getting done here in a positive way.”

Brian Armstrong, chief executive of Coinbase Global

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The event’s centrepiece was the creation, via executive order, of a “strategic bitcoin reserve” and a separate “digital asset stockpile”, both comprised of currencies that law enforcement seized from criminals. The government stash of 200,000 bitcoin was worth $17.5 billion as of Friday.

David Sacks, the Silicon Valley tech billionaire whom Trump appointed as his crypto czar, said: “The reserve is like a digital Fort Knox for the cryptocurrency often called ‘digital gold’.” The order, which also requires federal agencies to provide a “full accounting” of the digital currencies they have in custody, promised to “harness the power of digital assets for national prosperity, rather than letting them languish in limbo”. The “war on crypto”, Trump added, was over.

Yet for all the warm words, there was not as much behind the photo op as it appeared. Sacks made clear that the government would not spend “a dime” to acquire more bitcoin or other digital currencies. Instead, the announcement had the effect of essentially moving the government’s current holdings from a cheque account into a savings account. And the most consequential issue — how cryptocurrencies will be regulated — remained unanswered.

Perhaps most telling, the price of bitcoin was flat on Saturday morning, at $67,217. It has slid 10 per cent in the year to date.

The change in America’s attitudes to crypto since Trump returned to power can be marked by an event two weeks ago. On a clear night in Arizona. Ross Ulbricht, 40, walked out of a federal penitentiary with Leaf Erickson, a droopy pepper plant that, he said, had been “clinging to life” on the sill of his prison cell. It was his first breath of air as a free man for 11 years. Trump pardoned him on his second day in office.

Ulbricht was the creator of The Silk Road, an online narcotics and weapons bazaar where many of the hundreds of millions of dollars in transactions were done in cryptocurrency. The dark web site was an early proving ground for bitcoin, showing the utility of a stateless, digital currency to facilitate online commerce between anonymous online actors. The FBI arrested Ulbricht and in 2015, a judge sentenced him to life in prison without parole.

His incarceration had taken on totemic importance for many crypto enthusiasts. Announcing the pardon, Trump drew parallels between Ulbricht and his own brushes with the law, writing: “The scum that worked to convict him were some of the same lunatics who were involved in the modern day weaponisation of government against me.”

It wasn’t until years later, in 2022, that Washington’s antipathy toward crypto reached its apex. Crypto’s popularity had surged amid the pandemic-fueled market boom. Taking advantage of the lack of regulation, companies and individuals magicked up new “currencies”, writing white papers about what they would do with the funds raised then pumping their prospects on social media. Punters piled in.

Then came the bust. Prices cratered, vaporising $2 trillion of value and exposing innumerable scams. Tales abounded of people who lost their homes or were driven to suicide after losing everything when prices collapsed or unscrupulous promoters disappeared with their money. Several of the industry’s most prominent figures, led by FTX chief Sam Bankman-Fried, ended up in prison.

Sam Bankman-Fried was jailed for fraud over his failed FTX cryptocurrency exchange company

MICHAEL M SANTIAGO/GETTY IMAGES

And yet, America’s stock market regulator, the Securities and Exchange Commission (SEC) has continued to pursue a bizarrely ineffectual approach, branding many crypto exchanges as illegal enterprises, while also allowing them to continue to operate, and in the case of Coinbase, even float on the stock market.

The heart of the conflict revolves around a simple question: what is cryptocurrency? Is it a “security”, like company shares? Is it a commodity, like wheat or oil, or something else entirely? Does bitcoin, the progenitor of the industry, merit different treatment from the thousands of coins that have followed in its wake?

Definitions matter because each designation brings with it a clear regulatory regime. Under the SEC’s previous head Gary Gensler, the agency said most digital currencies were securities, which implies a higher level of consumer safeguards and regulations. It sued Coinbase, and rivals including Binance, Gemini and Kraken, claiming that they were illegally selling securities or running unregulated exchanges.

The cases were trudging through the courts. And then Trump was elected. Gensler, who came to be seen as a hate figure by most crypto enthusiasts, resigned. He is set to be replaced by Paul Atkins, a crypto-friendly commissioner.

While the market waits for his congressional confirmation, however, the SEC dropped its cases against several crypto companies, including Coinbase, Kraken and Gemini, the company started by Cameron and Tyler Winklevoss. At the summit, Cameron said: “We never thought that we’d get attacked the way we did in our backyard after trying to do the right thing for so many years and always trying to raise the bar with respect to regulations. So it’s truly wonderful to see how things have changed and how the pendulum has swung back in the way that it has.”

And yet, the precise regulatory picture remains murky. Critics fear that in the absence of clear rules, the laissez-faire approach of the new administration could lead to a rerun of mass fleecing of people we saw just a few years ago.

In the meantime investors, including the president and his family, are filling their boots. Indeed, just delays before his January 20 inauguration, Trump and his wife Melania both launched “memecoins”, a type of cryptocurrency with no underlying value or use but which seeks to cash in on a popular name or internet meme.

A recent estimate put the earnings from Trump’s coin at $350 million. The website for Melania’s warns that the coins are for “collecting and entertainment purposes only”. It added: “They are not financial instruments or investments. Always do your own research and never invest more than you can afford to lose.”

Since launch, Trump and Melania’s coins have lost 80 per cent and 92 per cent, respectively.