Trump's crypto scandal: Billion-dollar memecoin controversy

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

Professor Krugman, a Nobel Prize-winning economist, argues on his blog that the actions of the US president suggest he is essentially open to being bought. Similarly, Wired magazine contends that the president appears to be offering access to his entire administration. This practice raises serious ethical questions and may conflict with constitutional principles.

Krugman argues that cryptocurrencies are particularly well-suited for criminal activities, and in Trump’s case, they are being used clearly corruptly. According to him, those investing in $TRUMP or $MELANIA meme coins essentially purchase the president’s favor. The Nobel laureate also points out that among the buyers are affluent foreign individuals and even foreign governments, highlighting that this involves billions of dollars being funneled directly to the president 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, members of Congress, and their families from issuing their own cryptocurrency.

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

The wealth of Trump and his wife increased by £2.4 billion thanks to the issuance of memecoins "and further amounts are flowing to them," reminds the Washington Post.

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 £8 million.

Democrats were outraged by the information about a £1.6 billion investment in Trump's cryptocurrencies by a fund linked to the authorities of the United Arab Emirates. Additionally, other foreign entities, including the Israeli government and Hong Kong authorities, are also investing in the platform trading the president's family's memecoins.

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" for the American administration.

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

On Monday, 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 and twenty main buyers of Trump's cryptocurrency will be invited to dinner with the president, and 25 people who invested the largest sums will have a VIP tour of the White House.

Wired reminds us that the US Constitution includes a clause limiting the right of American administration officials to accept "any present, emolument, office or title from any foreign state 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 part of a larger pattern in the use of cryptocurrencies, which he believes have increasingly served as tools for illicit activities such as fraud, money laundering, and, as recent events suggest, political bribery.

This development has effectively granted Trump the unexpected position of a crypto billionaire, raising concerns that he might engage in actions that go beyond typical corruption, such as shaping regulations or making decisions to benefit those who discreetly inform him of their significant investments in $TRUMP, the Wall Street Journal cautioned.

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

Trump, who received substantial backing from the cryptocurrency industry during his election campaign, assured his donors that he would push for deregulation in this sector. The measures currently being introduced by his administration reflect this commitment. Economist Paul Krugman describes the situation as the emergence of an enormous speculative bubble, driven by digital assets that, in his view, lack real-world value. "This will end badly, and the sooner it does, the better."

Trump "issued" his memecoin just before taking office. Within a day of announcing this issuance, the president-elect profited up to £20 billion on paper. The price of his memecoin increased by over 400%, but in the following months, it dramatically dropped to £6. 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 £60. On Friday, the investment value of 220 people who had the most Trump memecoins reached £130 million. Reuters reported that the current market value of all $TRUMP memecoins is £2.2 billion.