Crypto Assets: From Utopian Dreams to Political Swamps

The Ultimate Swamp Asset in the Contemporary Financial Ecosystem

An industry that once dreamed of transcending politics is now synonymous with self-interest.

When the Qatari government offered to replace Air Force One with a Boeing 747, President Trump responded: Why not? Only a fool would refuse free money. Rarely in modern history has a presidential term given rise to so many conflicts of interest at such a rapid pace. However, the worst selfishness in American politics is not happening on the runway, but on the blockchain – home to trillions of dollars in cryptocurrency.

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Over the past six months, cryptocurrencies have played an unprecedented role in American public life. Several cabinet officials have invested heavily in digital assets. Cryptocurrency enthusiasts participate in the management of regulatory bodies. The industry’s largest corporations became major donors to the campaign, with exchanges and publishers pouring hundreds of millions of dollars to defend friendly lawmakers and crack down on opponents. Members of the president’s family market their cryptocurrency investments around the world. The largest investor in a meme coin is invited to dinner with the president. Crypto assets held by first families are now worth billions of dollars and may have become the largest single source of their wealth.

This phenomenon is in stark contrast to the origins of cryptocurrencies. When Bitcoin was born in 2009, it was welcomed by a utopian anti-authority movement. Early adopters had lofty goals to revolutionize the financial system and protect individuals from asset plunder and inflation. They want to hand over power to small investors and free them from the control of large financial institutions. It’s not just an asset, it’s a movement for technological liberation.

Now all this has been forgotten. Not only do cryptocurrencies fuel fraud, money laundering, and other types of financial crimes on a massive scale, the industry has also developed a sordid relationship with the executive branch of the U.S. government to a greater extent than Wall Street or any other industry. Cryptocurrencies have become the ultimate swamp asset.

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In stark contrast to the situation outside the United States. In recent years, different jurisdictions such as the EU, Japan, Singapore, Switzerland, and the UAE have successfully granted new regulatory transparency to digital assets while avoiding rampant conflicts of interest like those seen in the United States. In developing countries, government expropriation is prevalent, inflation rates are high, and the risk of currency devaluation is severe, where Crypto Assets continue to play the role envisioned by early idealists.

All of this is happening as the underlying technology of digital assets is maturing. Although there is still a lot of speculation, mainstream financial companies and tech companies are increasingly taking crypto seriously. Over the past 18 months, the number of real-world assets such as private credit, U.S. Treasuries, and commodities being “tokenized” and traded on the blockchain has nearly tripled. Traditional financial institutions become large issuers of tokenized money market funds. Cryptocurrency companies are also involved, issuing tokens pegged to assets such as gold.

Perhaps the most promising use is in the field of payments. Some companies are embracing stablecoins (digital tokens backed by other, more traditional assets). In the past month alone, Mastercard has announced that it will allow customers and merchants to use stablecoins for payments and settlements. Fintech company Stripe has launched stablecoin financial accounts in 101 countries and also acquired stablecoin platform Bridge this year. Three years after abandoning the Diem project, Meta may try to enter the space again.

This is an opportunity for cryptocurrency companies to seize even if they are at risk. Proponents argue that under the previous administration, they had no choice but to use all means in the United States to protect themselves. Under the leadership of regulators at the time, the SEC was pessimistic about the industry, embroiling numerous high-profile companies in enforcement actions and legal cases. As a result, banks are afraid to provide services to crypto companies and are afraid to venture into cryptocurrencies, especially stablecoins. From this point of view, the industry has its plausibility. Clarifying the legal status of cryptocurrencies through the courts, rather than Congress, is neither particularly effective nor always fair. Today, the regulatory pendulum has swung violently in the opposite direction, with most cases against cryptocurrency companies dropped.

As a result, cryptocurrencies need to save themselves in the United States. New rules are still needed to ensure that risks are not injected into the financial system. If politicians fail to properly regulate cryptocurrencies for fear of the industry’s electoral influence, the long-term consequences will be detrimental. The dangers of putting too few safeguards in place are not just theoretical. The three largest banks that collapsed in 2023 all have significant exposure to floating deposits in the crypto industry. Stablecoins are susceptible to runs and should be regulated like banks.

Without such a change, the leading figures in the crypto space will eventually regret the agreement reached in Washington. The industry is mostly silent about the conflicts of interest that arise from certain family cryptocurrency investments. Legislation is needed to clarify the status of industries and assets, and to provide cryptocurrency companies with the more rational regulatory security that they have long hoped for. The interweaving of the government’s commercial interests with government affairs has made this more difficult. In May, the bill failed to pass a procedural vote in the Senate as several senators withdrew their support for a cryptocurrency bill.

Crypto Assets industry becomes the political center of the United States

Thanks to investments from powerful families, friendly regulators, and generous election spending.

In late April, Fr8Tech, a Texas-based logistics company with a market capitalization of about $3 million, launched an unusual investment. The company said it would borrow up to $20 million to buy the TRUMP Meme coin, a cryptocurrency launched three days before the start of the new presidential term. The company that manages the Meme coin announced that the largest investors will be invited to dinner with the president at the end of May. Fr8Tech’s CEO said the purchase of the token would be an “effective way” to “advocate” the trade policy that the company wants.

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That same week, the night sky in Lahore, Pakistan, was lit up with fireworks. The Pakistan Cryptocurrency Council, established by finance ministers in March, is celebrating its partnership with World Liberty Financial (WLF). WLF is a company owned by high-ranking politicians and their families. WLF has pledged to help Pakistan develop blockchain products that convert real-world assets into digital tokens and provide broader advice on the cryptocurrency industry. Details of the agreement were not disclosed. The Indian media interpreted the deal as Pakistan’s attempt to win political favor – an interpretation that became even more awkward two weeks later when a ceasefire in an India-Pakistani military clash was attributed to the United States. Many Indians believe that this truce is too beneficial for Pakistan.

These events marked the beginning of a profound change in Washington. Cryptocurrencies are on the rise. The political leadership and its family members promote it both at home and abroad. A more lenient approach has been taken by newly appointed regulators. Investors are pouring in. Large pressure groups have sprung up in favor of crypto-pro-crypto political candidates and punish opponents. Investors and advocates, including foreign governments, have found that this can provide access to well-connected people. The young industry suddenly found itself at the heart of American public life. But its close ties to specific political families also make it somewhat of a partisan enterprise, which could ultimately do more harm than good to the industry.

For many years, various industries have been intertwined with the political class. Banks, arms manufacturers, and large pharmaceutical companies have long maintained influence in the corridors of power. In the late 19th century, railroad companies exerted significant influence on national and local politics, obtaining favorable regulations that led to great prosperity and a disastrous depression.

But no other industry has gone from near-pariahs to official darling like cryptocurrency. At the beginning of a politician’s first term, the total value of all cryptocurrencies in the world was less than $20 billion. Today, it’s more than $3 trillion. In 2017, cryptocurrencies were not mentioned at all at the SEC chairman’s Senate confirmation hearing. As recently as 2021, top leaders despised digital assets: “Bitcoin looks like a scam, and I don’t like it because it’s another currency that competes with the dollar.” This view seemed to be confirmed the following year, when the collapse in the price of digital assets and the $8 billion fraud at the major crypto exchange FTX heralded a “crypto winter” for the industry.

Regulators also hold a pessimistic view towards many Crypto Assets. The previous administration’s SEC chairman insisted that many cryptocurrencies are actually securities and should therefore only be traded on exchanges regulated by the SEC. The agency subsequently sued several large cryptocurrency trading platforms, as well as many other digital asset companies.

However, since the regime change, those financial regulators who had previously tried to curb cryptocurrency have suddenly become keen to prop it up. This is due to the fact that most of the newly appointed officials are strong supporters of the field. The new SEC chairman served as co-chair of a crypto industry group for eight years. Nominated for Chairman of the Commodity Futures Trading Committee, he was previously the head of crypto policy at a prominent venture capital firm.

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The change in the leadership of the SEC in the United States has led to a dramatic shift in policy. Today, there is a much narrower view of what cryptoassets are securities and what needs to be regulated. The members of the newly formed Crypto Task Force responsible for the committee are affectionately known in the industry as “Crypto Moms.” Since the new government took office, more than a dozen enforcement actions against crypto companies have been halted, including against two major exchanges, a major cryptocurrency issuer, and the first crypto company to receive a state banking license. All this naturally boosted the industry: venture capital funds poured almost $5 billion into crypto companies in the first three months of 2025, the highest amount in almost three years.

It is not unheard of for significant regulatory reversals to occur when a new leadership takes office and installs like-minded officials. When a Republican administration replaces a Democratic one, the pendulum often shifts from intervention to laissez-faire. However, it is unusual for top officials and their families to be deeply involved in industries that benefit from deregulation.

Politicians are investing more and more in the cryptocurrency space. WLF, in which a family holds 60% of the shares, was established in September 2024. The company announced the launch of a new stablecoin (a cryptocurrency pegged to the value of another asset, usually the U.S. dollar) in March of this year. The token, called USD1, has a market cap of over $2 billion, making it one of the largest dollar-pegged cryptocurrencies in the world.

The company has a prominent background, with its key foreign policy “trader” as its “honorary co-founder” and its son as its “co-founder”. The top leaders are the “chief crypto advocates.” A footnote on the website warns: “Any references, quotations, or related images should not be construed as an endorsement.” The spokesperson said that WLF is a private company with no political affiliation and no one in the government is in its management.

In addition to WLF, there are other crypto assets. There is also a Meme coin (a cryptocurrency created to capitalize on trends or jokes) that soared in value after its launch, peaking at one point at about $15 billion in market capitalization before plummeting to a fraction of that number. Companies associated with high-level families own 80% of these tokens. The First Lady also launched another meme coin in January this year, which also experienced a crash after a sharp rise in value.

The business interests involving Crypto Assets also extend through a social media company, which announced in April this year a partnership with a certain trading platform to sell exchange-traded funds (ETFs) related to digital assets and other securities. The company stated that it is also considering launching its own encryption wallet and coin.

The volatility of these assets and the uncertainty of ownership make it difficult to determine how much of certain families’ wealth is tied up in these investments. Crypto Assets may now represent the largest single business line for the family, with just the Meme coin holdings valued at nearly $2 billion, which is not far off from the total of all their real estate, golf courses, and clubs.

The resurgence of the cryptocurrency industry has not only benefited from political connections. Large electoral pressure groups (superPACs) have been investing heavily to promote the interests of the industry. Protect Progress, Fairshake and Defend American Jobs, a network of linked super PACs, spent more than $130 million on the eve of last year’s election, making them among the highest-spending groups on the campaign trail. All of them were formed after the last presidential election. With $260 million in revenue from the last election cycle, Fairshake is not only the largest PAC advocating for a specific industry, but also the largest nonpartisan super PAC of all types. In comparison, the National Association of Realtors raised about $20 million. A DEX and a trading platform are the largest corporate donors to Fairshake, while the founder of a well-known venture capital firm is the largest individual donor.

Rather than directly emphasizing a candidate’s views on cryptocurrency, Fairshake’s strategy targets ads on any issues that might promote the politicians they favor or hinder those they don’t like. It criticized California Democratic Congresswoman Katie Porter for trying to sell her list of campaign donors in an ad that helped her lose the Senate primary. Another ad in support of New York State Rep. Pat Ryan praised his tough stance on fighting crime. “Many industries have tried this. The difference is in its singular focus, and that’s where the real game changer,” said Josh Vlasto, a spokesperson for Fairshake. “The founding strategy is and still is: support supporters, oppose opponents.”

“It’s the most blatant display of money and power I’ve ever seen in a legislature,” said Amanda Fischer, chief operating officer of Better Markets, a lobby group advocating for greater financial regulation in the United States. She was chief of staff to the former SEC chairman. Fairshake alone has $116 million in cash in its hands to be used in the 2026 midterm elections.

The “war fund” of the crypto industry should help persuade Congress to adopt its policy preferences. Most importantly, it hopes that Congress will clarify the legal status of crypto assets to prevent the regulatory pendulum from swinging again in future elections. After all, leadership comes and goes, while legislation tends to be more enduring.

The crypto industry wants to define most cryptocurrencies as commodities, regulated by the Commodity Futures Trading Commission (CFTC), rather than by the SEC as securities. The CFTC is responsible for regulating the trading of most financial derivatives and is the smaller of the two regulators. For the current fiscal year, it requested a budget of $399 million and 725 full-time employees, compared to the SEC’s budget of $2.6 billion and 5,073 employees. The crypto industry sees the former as a more lenient form of regulation.

A bill to make the CFTC the primary regulator for cryptocurrencies was blocked in Congress last year. But Republicans, who favor lighter financial regulation, have controlled both chambers since January. What’s more, many Democrats acknowledge the benefits of putting crypto assets on a clearer legal basis. However, the crypto frenzy of certain political families is making it harder for the industry to win enough support in Congress.

The apparent conflict of interest sparked a wave of criticism from Democratic lawmakers. They argue that many investors invest in crypto assets simply to curry favor with power centers. For example, they noted that the price of a certain Meme coin soared after the announcement of a dinner party for large investors. In another turmoil, MGX, an investment firm set up by the Abu Dhabi government, decided to use WLF’s USD1 as a vehicle to invest $2 billion in a trading platform. The use of cryptocurrencies to fund such large-scale investments is unusual in itself, and the business rationale for using a completely new and untested cryptocurrency is even less clear. But WLF benefited enormously: the deal catapulted USD1 from obscurity to become the world’s seventh-largest stablecoin.

In May, a bipartisan bill to create a clear regulatory framework for stablecoins failed to gain Senate approval. Advocates of the bill had confidence in its passage. But previously positive Democrats are beginning to worry that this could fuel what they see as influence-peddling. Two Democratic senators, Jeff Merkley and Chuck Schumer, have introduced a bill that would prevent the president, members of Congress, and senior White House officials from producing, sponsoring, or endorsing cryptoassets. Even Republican Senator Cynthia Lummis, who has been a vocal advocate for clear cryptocurrency regulation and was a co-sponsor of the original bill, told NBC that the “dinner” incident “made me hesitate.”

Concerns about cryptocurrency regulation are not limited to the leadership’s ties to the industry. Steven Kelly of the Yale Financial Stability Project argues that a fast-growing crypto industry, overseen by a small, non-interventionist regulator, could pose a risk to financial stability. He noted that cryptocurrencies are at the heart of the banking crisis that will shake the US in 2023. Banks, which started the crisis, had a lot of business with crypto companies and investors, and were hit hard by the crypto winter. When fears of its losses devolved into a run, the 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. Democratic Senator Elizabeth Warren said the stablecoin bill would increase the risk of financial collapse.

Publicly, crypto advocates remain optimistic that the industry will receive supportive legislation. Privately, however, some industry leaders are harshly critical of certain crypto ventures. They fear that the semblance that the industry is seen as a tool for peddling influence will discourage legislators from supporting favorable legislation. Nick Carter, a prominent investor in the crypto industry, is one of the few who is willing to publicly say that certain families’ financial interests in the crypto industry are making crypto-friendly legislation harder to get approved. He said that the reaction to such criticism was not positive. “When I talked about it, I was contacted and complained.” However, trying to silence those who state the obvious is unlikely to work. “The conflict is real,” Carter said. “No one can really dispute that.”