Photo-Illustration: Intelligencer; Photo: Getty Images
With an unelected billionaire taking a wrecking ball to the administrative state and the president’s Cabinet giving away national secrets, it can be easy to forget that the president is treating the crypto industry like an open-source ATM.
You may remember that Donald Trump launched a novelty cryptocurrency in January — followed by one for the First Lady — making over $100 million off trading fees. But just this month, Trump’s business interests also announced the launch of a third cryptocurrency, a murky crypto SPAC plan from Trump Media executives, and a crypto investment fund with a major exchange two days after the Securities and Exchange Commission announced the end of a formal probe into the company. With Trump’s crypto ventures speeding up, I spoke with Corey Frayer — a senior adviser to former SEC chair Gary Gensler — about crypto’s new attitude under a lax regulatory environment and the “unthinkable” conflicts of interest that could still be on their way.
Since you left the SEC in January, what has been the greatest change you’ve seen so far?
I would say the very first change was the political retribution against the staff at the SEC who had worked on crypto policy. A great example is that one of the top crypto litigators was reassigned to the IT department.
It sends the message that the decisions of financial regulators aren’t guided by independent expertise in the markets; they are generated by a desired policy outcome dictated by politics. Plus the dismissal of important and well-founded enforcement actions has sent a message to the markets that the largest firms and platforms can do whatever they like without fear of accountability. Investors and the little guys are on their own.
This week, Trump’s family announced a stablecoin the day before Republicans introduced new legislation on that type of cryptocurrency. Then his team also launched a new ETF with Crypto.com a day before the SEC ended its probe of that company. It’s confusing to me why the president needs an ETF or a stablecoin.
I mean, it’s not confusing in the context of this president. Crypto has just been another addition to the portfolio of conflicts of interest that Trump and his family have.
Trump’s businesses have been riddled with conflicts of interest since he entered politics. How much different are his crypto interests?
There are many avenues in crypto where this creates what would’ve been otherwise-unthinkable incentives and conflicts for the most powerful office in the United States.
We saw that Justin Sun made an enormous investment in Trump’s business World Liberty Financial after the election. Then his case was dismissed by the SEC that had recently come under the leadership of a Trump appointee. We saw it with the news that World Liberty Financial was engaging in negotiations with Binance, whose former CEO had pleaded guilty to criminal charges. There does seem to be a huge advantage to being associated with Trump businesses in terms of being released from enforcement cases.
As someone concerned with investor protection, what would you like to see Democrats do here to counter this?
Democrats should be in unified opposition to anything that puts the economy and investors and consumers at risk.
Have we seen that unified opposition over the past two months?
With regard to crypto? No, not at all. Democrats on the Senate Banking Committee supported a stablecoin bill that legitimizes crypto but also holds it to a far lesser standard than almost any other part of the financial system.
I’m wondering how much more could the president get out of crypto? Do you see this expansion continuing until the market tanks or he is checked somehow?
Yeah, I mean, Trump knows a good grift when he sees one. There are a lot of people who have said that Trump doesn’t really understand crypto. And while that may be true at a technological level, I don’t think I have ever seen anyone so quickly master the pump-and-dump business model of crypto like he did with his meme coin.
I haven’t seen anything so far, and I think it would be delusional to think that if the SEC isn’t even going to continue prosecuting fraud charges that there will be any credible oversight and accountability of the crypto industry.
Do you see Trump’s crypto interests bleeding over into other aspects of his administration?
It has been reported that HUD, for example, is considering moving to crypto and stablecoins for some of its grant issuance. USAID — what’s left of USAID — may look to pay out some of its grants and other obligations in stablecoin. You have this dangerous and extremely unpopular technology that the president is in a position to force adoption over. So there are a lot of people who are going to be put in harm’s way, even if they didn’t choose to expose themselves to the volatility and dangers of the crypto markets.
That’s an interesting philosophical point. If the government is forcing Americans to be exposed to crypto, it’s very much in contradiction to the original decentralized vision of this form of currency.
Despite the crypto community claiming it wanted to be outside the purview of the government, it has banged down the door to be part of the mainstream financial system with the approval of the bitcoin ETF and dozens of filings that have come into the SEC since Inauguration Day. There is no remainder of the crypto ethos except for a desire to benefit from the lack of government oversight and regulation.
This conversation has been edited for length and clarity.
