Donald Trump and the “crypto capital of the planet”

How times change. Only three years ago, President-elect Donald Trump declared cryptocurrencies to be a “scam” and a threat to the primacy of the dollar in the international economy. We think he was right to be concerned on both counts. Yet in his keynote address to the Bitcoin 2024 conference, Donald Trump reversed his position and promised to make the United States “the crypto capital of the planet” if he were elected. Now his son Eric reminds the world of this campaign promise made in July 2024.

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Given the Trump family’s personal investments in crypto and the growing social influence of prominent crypto entrepreneurs, enlightened self-interest is clearly a major force. At the Bitcoin conference, Trump and Robert F. Kennedy Jr suggested creating a new regulatory body where “the rules will be written by people who live your industry, not hate your industry”.

Either way, the support of the crypto titans in funding Trump’s electoral campaign is already paying dividends. Among Trump’s most consequential appointments to his new administration is prominent cryptocurrency advocate, Paul Atkins, to be the head of the Securities and Exchange Commission. In addition, venture capitalist David Sacks will be the “White House AI and Crypto Czar”. These appointments will, according to Trump, help to ensure the development of a legal framework that will give “the crypto industry the clarity it has been asking for.”

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In practice, this will almost certainly mean giving the crypto sector even greater freedom from government oversight, one of the central ideological justifications for the development of crypto currencies in the first place, of course. It also raises another question that animates more sceptical discussions of the crypto universe: can the tech bros be trusted to act in the greater public good? Especially given the libertarian streak that imbues crypto and the proliferation of memecoin scams.

Populists using tech-fuelled bets on the future of their national economies to make themselves look good might be becoming an international playbook.

As the experience of El Salvador reminds us, there is potential for things to go badly wrong. El Salvador’s President Nayib Bukele made Bitcoin legal tender in 2021, in a move researchers describe as textbook authoritarian populism, rather than technologically visionary. When Bitcoin crashed in 2022, it exacerbated El Salvador’s post-Covid economic crisis. Bukele recently wound the experiment back to cement a new bailout deal with the International Monetary Fund, allowing businesses to choose to accept or reject payments in Bitcoin.

But Bukele has been celebrating after his bet on crypto seemingly came good in the wake of the post-Trump Bitcoin spike. Populists using tech-fuelled bets on the future of their national economies to make themselves look good might be becoming an international playbook. For leaders disdainful of traditional democratic checks like Trump and Bukele, “embracing technology” is an opportunity to show the extent of their ambitions (or hopes for what political gains can be reaped from this). Bukele anticipates an uplift for El Salvador’s “investment, tourism, innovation and economic development”. While for Trump, it appears to be a “planetary” vision, which is ironic considering the environmental cost of cryptocurrencies.

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True, the United States is not El Salvador, but this should make Trump’s actions a matter of greater concern, not less. After all, the health of the US economy matters to everyone, not just the Americans. Should there be a widespread collapse in confidence in the value of the US dollar or America’s ability to pay its debts, this is another case of “our currency, your problem”, as former US treasury secretary John Connally famously told his European counterparts just before Nixon unilaterally abandoned the gold standard.

Could America’s domestic policies trigger another global economic crisis? Absolutely. The rather misnamed “global financial crisis” and the “subprime debt crisis” were caused primarily by failures of domestic governance and regulatory oversight in the United States. One of the great attractions of crypto for speculators and self-interested boosters is its inherent volatility and detachment from any sort of underlying value. Crypto is worth whatever people believe it is worth, until they don’t, of course.

Like any Ponzi scheme, it’s a great opportunity for those who get in at the beginning to make (lots of) money for nothing. Subsequent entrants are increasingly motivated by the “fear of missing out”, creating what Charles Kindleberger called a “mob psychology”, which is inevitably followed by a panic as the market goes into decline. The Dotcom boom and bust illustrates the durability of this phenomenon. For those who buy at the top of the market, the chances of being wiped out are very real.

The great irony of Trump’s policies is that they make such irrationality and greed all the more likely with entirely predictable economic and social consequences, while winning him support from an increasingly vocal and wealthy community. This would be a problem at any time, but when Trump is also intending to start a trade war with China that looks eerily reminiscent of the Great Depression, the outlook could hardly be more sobering.

Indeed, when international politics are being shaped by pointless and avoidable conflicts, not to mention the growing threat posed by unaddressed environmental breakdown, it is difficult to imagine a more inappropriate public policy goal than making America the centre of the crypto world. But then again, it’s difficult to imagine how Americans could have elected a convicted felon who has applied for bankruptcy protection at least four times to restore the country to “greatness”. Strange times indeed.