Trump's memecoins: Corruption claims shake U.S. politics

According to the US Securities and Exchange Commission (SEC) definition, a meme coin is a digital asset not linked to tangible goods or currencies whose usage or functionality is "limited or nonexistent." Memecoins are not subject to any regulations.

Professor Krugman, an economics Nobel laureate, writes on his blog that "the US president is effectively for sale," and the magazine "Wired" assesses that "the president is practically selling access to his entire administration," which raises ethical concerns and is likely inconsistent with the Constitution.

Krugman argues that cryptocurrencies are particularly well-suited for use in criminal activities, and in Trump’s situation, they are being utilized corruptly. He suggests that those purchasing $TRUMP or $MELANIA meme coins effectively secure the president’s favour. The Nobel Prize-winning economist also notes that among the buyers are affluent individuals from abroad and foreign governments, stressing that these transactions are directing billions of dollars straight to Trump and his family.

On Friday, the "Washington Post" pointed out that the cryptocurrency bill pushed by Republicans "finally prompted Democrats to fight" against the Trump administration. In the Senate, the Democrats did not allow voting on this matter, and additionally demanded a bill banning presidents, congressmen, and their families from issuing their cryptocurrencies.

In the House of Representatives, during a hearing on the bill, Democrats announced that Trump found himself in a "conflict of interest " due to the benefits derived from his own meme coins and demonstratively walked out of the session.

According to the Washington Post, Trump and his wife's wealth rose by €2.7 billion due to the issuing of meme coins, and additional funds continued to be directed their way.

"The New York Times" added that since Trump offered his memecoin four months ago, at least 764,000 people who bought the cryptocurrency have lost money. Meanwhile, savvy investors selling $TRUMP to less sophisticated players made a fortune. Fifty-eight of them gained at least $10 million.

Democrats were outraged by information about a $2 billion investment in Trump's cryptocurrencies by a fund linked to the authorities of the United Arab Emirates. Other foreign entities, including the Israeli government and Hong Kong authorities, are also investing in the platform trading the president's family's meme coins.

At the beginning of Trump's second term, the Wall Street Journal assessed that the president's profiting from issuing his own digital assets and his influence on regulating the financial market are "red alerts concerning political and ethical threats" to the American administration.

The president created a mechanism that "Wired" called "pay-to-play. " Particularly dangerous about it is that cryptocurrency trading occurs anonymously, and—as the magazine emphasizes—neither Congress nor the public knows if people like Vladimir Putin have bought access to the US president.

On Monday at 1:00 PM ET, the auction ended where major investors in the Trump family's cryptocurrency could win a dinner with the president at one of his golf courses, recalls the "New York Times". Two hundred twenty main buyers of Trump's cryptocurrency will be invited to dinner with the president, and 25 people who invested the most considerable sums will have a VIP tour of the White House.

"Wired" reminds that the US Constitution includes a clause limiting the right of American administration officials to accept "gifts, emoluments, offices, or titles from foreign governments without the consent of Congress." Since Trump receives payment for, in effect, access to himself and his administration, which is usually subject to very meticulous control, the question arises whether he is violating constitutional provisions.

Paul Krugman views this as consistent with his broader critique of cryptocurrencies, which he believes have evolved into instruments commonly used for illicit purposes such as fraud, money laundering, and political bribery, as current developments suggest.

This has given Trump "the sudden status of a crypto billionaire," who may break the law in ways beyond corruption, for example by influencing regulations or making decisions in a way to repay those who whisper to him that they are investing large sums in $TRUMP - warned the "WSJ".

Buying the US president's favour and debt of gratitude is not the only significant risk associated with the cryptoization of mainstream finance, warns "The Economist". Potentially poorly organized mergers of cryptocurrency firms with traditional financial institutions, combined with the unstable value of cryptocurrencies, increase the risk of bank runs and destabilization of the system.

Trump, whose election campaign was generously supported by the cryptocurrency sector, promised his sponsors that he would lead to the deregulation of this industry. The changes his administration is implementing are heading in this direction. "A giant speculative bubble" is growing, based on digital assets devoid of "any value tied to reality," assesses Krugman. "It will end badly, and the sooner it ends, the better."

Trump "issued" his memecoin just before taking office. Within a day of announcing this issuance, the president-elect profited up to $25 billion on paper. The price of his memecoin increased by over 400%, but in the following months, it dramatically dropped to CAD 10. However, when Trump announced that 220 top investors would be invited "to the most exclusive dinner in the world," the price rose again and temporarily reached CAD 100. On Friday, the investment value of 220 people who had the most Trump memecoins reached CAD 215 million. Reuters reported that the current market value of all $TRUMP memecoins is $3.7 billion CAD.