Trump has normalized crypto. Is it the path to the next financial collapse? | Eduardo Porter
Donald Trump has embraced cryptocurrency after once calling it a "scam", using his presidency to personally profit while dismantling regulatory oversight of the industry. Columnist Eduardo Porter argues this poses a serious risk to US financial stability, as Trump's administration has weakened enforcement and integrated volatile, uninsured crypto assets into the mainstream banking system that ordinary Americans rely on.
Trump reportedly earned $2.2bn in his first year back in office, with $1.2bn coming from crypto dealings, including his "World Liberty Financial" venture (49% sold to a UAE-linked firm for $500m) and his $Trump memecoin, which cost investors nearly $4bn while netting him over $600m. His administration curtailed SEC enforcement and DOJ prosecutions of crypto-related misconduct, while Congress passed the Genius Act, allowing banks and retailers to issue uninsured "stablecoins" now used mainly to trade riskier crypto assets like bitcoin.
In short
- Trump made $1.2bn from crypto while deregulating the industry as president
- Genius Act lets banks issue uninsured stablecoins tied to crypto trading
- Critics warn this integration risks broader US financial stability
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The case for
Integrating volatile, largely uninsured crypto assets into mainstream banking without proportionate regulatory oversight creates systemic financial risks to ordinary savers and borrowers, particularly when policymakers have direct financial interests in the industry's success. Allowing banks to issue uninsured stablecoins primarily used for speculative trading echoes the regulatory failures that preceded previous financial crises, and normalising unproven financial instruments without adequate consumer protections threatens the stability of the banking system ordinary people depend on.
The case against
Cryptocurrency represents a genuine financial innovation that overly restrictive regulation has historically suppressed, and bringing it into formal, regulated banking channels is more prudent than forcing it into unregulated shadow markets beyond government oversight. Properly designed stablecoins and crypto systems can enhance financial access and utility, and blocking their development simply ensures that American innovation will be surpassed by other nations and that economic activity migrates to jurisdictions with laxer, less protective standards.
Explained simply
Cryptocurrency is a form of digital money that exists only online and operates outside traditional banking systems. Donald Trump previously disparaged crypto as a scam, but his recent return to office has coincided with a reversal of that position, as he has become closely involved with various cryptocurrency projects.
The Trump administration has taken steps to reduce government oversight of the cryptocurrency industry, including curtailing enforcement actions by federal agencies like the Securities and Exchange Commission and Department of Justice against crypto-related misconduct. Congress has also passed new legislation permitting banks and retailers to issue certain types of cryptocurrency called stablecoins, which are increasingly used to trade other crypto assets.
These changes matter because cryptocurrency remains a largely uninsured and volatile asset, meaning people who invest in it have little legal protection if things go wrong. The integration of crypto into mainstream banking institutions creates a connection between the crypto sector and the broader financial system that ordinary people depend upon, raising questions about whether instability in one could affect the other.
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