Original Title: What Trump's Embrace of Crypto Has Unleashed

Original Authors: David Yaffe-Bellany, Eric Lipton, The New York Times

Original Translation: Chopper, Foresight News

This summer, a group of corporate executives pitched a business plan to Wall Street financier and former Trump administration advisor Anthony Scaramucci. They wanted Scaramucci to join a publicly traded company with a unique strategy: accumulating a large amount of cryptocurrency assets to enhance the company's appeal to investors.

"They didn't really need to convince me much," Scaramucci recalled. Shortly after, he became an advisor to three unknown companies adopting this strategy, and the "whole collaboration process went very smoothly."

However, this frenzy did not last long. With the fall in the cryptocurrency market this autumn, the stock prices of the three companies Scaramucci was involved with plummeted, with the worst-performing company dropping by over 80%.

The rise and fall of these companies are a microcosm of the cryptocurrency frenzy sparked by Trump. This self-proclaimed "first cryptocurrency president" not only ended regulatory crackdowns on cryptocurrency companies but also openly promoted cryptocurrency investments in the White House, signed bills supporting cryptocurrency development, and even issued a meme coin named TRUMP, propelling this once-niche field to the forefront of the global economy.

Now, the ripple effects of Trump's cryptocurrency endorsement are gradually becoming apparent.

Throughout this year, a large number of boundary-breaking cryptocurrency startups have emerged, pulling more people into this volatile market. Over 250 publicly traded companies are now accumulating cryptocurrency — the price volatility of these digital assets is no different from traditional investments such as stocks and bonds.

In 2024, former Trump advisor Anthony Scaramucci attends a Bitcoin conference in the UAE

A wave of companies has introduced innovative products, lowering the barriers to including cryptocurrency in brokerage accounts and retirement plans. At the same time, industry executives are lobbying regulators, planning to issue cryptocurrency tokens pegged to publicly traded company stocks to create a crypto-based stock trading market.

This wave of radical innovation has exposed many issues. Over the past two months, mainstream cryptocurrency prices have experienced a sharp decline, leading to a crisis for enterprises heavily invested in crypto assets. Other emerging projects have also raised alarms from economists and regulatory bodies, with market risks continuing to accumulate.

The core concern that has raised alarms among various parties lies in the continued expansion of leverage. By this fall, publicly traded companies have massively borrowed to purchase cryptocurrency; investors' holdings of cryptocurrency futures contracts have surpassed $200 billion, with many of these trades relying on leveraged funds, which could bring enormous profits but also hidden liquidation risks.

Of even greater concern, a series of new initiatives in the cryptocurrency industry have tightly linked the crypto market with the stock market and other financial sectors. Should a crisis erupt in the cryptocurrency market, the risk may spread to the entire financial system, triggering a chain reaction.

"Today, the boundary between speculation, gambling, and investment has become increasingly blurred," said Timothy Massad, who served as Assistant Secretary of the Treasury for Financial Stability after the 2008 financial crisis. "This situation deeply concerns me."

White House Press Secretary Karoline Leavitt responded by stating that Trump's policy is "driving innovation to create economic opportunities for all Americans and helping the U.S. become a global cryptocurrency hub."

Cryptocurrency industry executives argue that these emerging projects demonstrate the potential of cryptocurrency technology to reshape the outdated financial system. In their view, market volatility is precisely the opportunity for profit.

"High risk often accompanies high returns," said Duncan Moir, CEO of 21Shares, a company issuing cryptocurrency investment products. "Our mission is to bring these investment opportunities to more people."

The rise of this wave of innovation is inseparable from the comprehensive deregulation of the regulatory environment, which is the most friendly regulatory window that cryptocurrency enterprises have encountered. For many years prior, the U.S. Securities and Exchange Commission (SEC) has been at odds with the cryptocurrency industry; however, in January of this year, the agency formed a cryptocurrency special working group and has held meetings with dozens of companies seeking new rule support or product listing approvals.

A spokesperson for the U.S. Securities and Exchange Commission stated that the agency is committed to "ensuring that investors have full information to make informed investment decisions."

U.S. Securities and Exchange Commission Washington D.C. Headquarters

It is worth noting that many of these emerging companies are associated with the continuously expanding cryptocurrency business empire of the Trump family, a connection that has blurred the lines between business and government.

This summer, executives from Trump's cryptocurrency startup World Liberty Financial announced their joining of the board of directors of the publicly traded company ALT5 Sigma. This company originally focused on recycling business but now plans to raise $1.5 billion to enter the cryptocurrency market.

The Capital Frenzy: An Uncontrolled Crypto Gamble

Cryptocurrency enthusiasts have dubbed this high-risk investment craze spawned by the Trump administration as the "Summer of Cryptofinance Company."

Cryptofinance Companies (CFCs) refer to publicly traded companies with hoarding cryptocurrency as their core objective. Data from the cryptocurrency advisory firm Architect Partners shows that nearly half of these emerging companies focus on hoarding Bitcoin, the most well-known cryptocurrency, while dozens of other companies have announced plans to acquire meme coins like Dogecoin.

Number of Cryptofinance Company Incorporations by Month in 2025. Data Source: Architect Partners, Data as of December 16

The operation model of these companies is often straightforward: a group of executives target a niche publicly traded company (e.g., a toy manufacturer) and persuade it to transition to a cryptocurrency hoarding business. Subsequently, they partner with this company to raise hundreds of millions of dollars from high-net-worth investors, ultimately using the funds to purchase cryptocurrency.

Their core objective is to allow more people to participate in cryptocurrency investments by issuing traditional stock pegged to cryptocurrency prices. This strategy theoretically offers significant profit potential. Many investment funds and asset management institutions have been cautious about direct cryptocurrency investment due to the complex storage process, high costs, and susceptibility to hacks.

Investing in Cryptofinance Companies is akin to outsourcing the logistics work such as cryptocurrency storage. However, these companies also pose significant risks: many were hastily established, and their management lacks experience in operating publicly traded companies. According to Architect Partners' data, these companies have collectively announced plans to borrow over $20 billion to purchase cryptocurrency.

"Leverage is the culprit of financial crises." Corey Frayer, a former cryptocurrency advisor to the U.S. Securities and Exchange Commission, warned, "and the current market is fostering massive leverage."

Several crypto treasury companies have run into operational difficulties or management crises, resulting in significant losses for investors.

Publicly traded firm Forward Industries pivoted to a crypto treasury company, heavily holding SOL. In September of this year, the company raised over $1.6 billion from private investors, sending its stock price soaring to nearly $40 per share at one point.

Allan Teh from Miami, managing assets for a family office, invested $2.5 million in Forward Industries this year. "Everyone thought this strategy was foolproof at the time, with crypto asset prices expected to keep rising," Allan Teh recalled.

However, as the cryptocurrency market plummeted, Forward Industries' stock price dropped to as low as $7 per share earlier this month. The company announced plans to buy back $1 billion worth of stock over the next two years, but this move failed to halt the stock's decline.

"The music stopped, and the game ended. Now I'm starting to panic. Can I get out in time?" Allan Teh is now down around $1.5 million. "How much further will this investment's loss go?" Forward Industries declined to comment on this.

The proliferation of crypto treasury firms has caught the attention of the U.S. Securities and Exchange Commission. "Clearly, we are concerned about this," said SEC Chairman Paul Atkins in an interview at a Miami cryptocurrency conference last month. "We are closely monitoring the situation."

Behind this new cryptocurrency race track lies strong support from the Trump family.

Founders of World Liberty Financial include Eric Trump and Zach Witkoff, sons of the former U.S. President

In August of this year, World Liberty Financial announced that its founders, including Eric Trump (son of the President), would join the board of ALT5 Sigma. This publicly traded company plans to hoard the crypto token WLFI issued by World Liberty Financial (Eric Trump currently holds the title of Strategic Advisor and Board Observer).

This collaboration appears to enable the Trump family to swiftly profit. According to the revenue-sharing agreement disclosed on the World Liberty Financial website, whenever WLFI token trades occur, businesses under the Trump family umbrella can take a cut.

Since then, ALT5 Sigma's operations have taken a sharp turn for the worse. In August, the company disclosed that a senior executive of one of its subsidiaries had been convicted of money laundering in Rwanda, and the board is investigating other "undisclosed matters." Shortly after, ALT5 Sigma announced the suspension of its CEO and the termination of contracts with two other executives.

Since August, the company's stock price has plummeted by 85%. A spokesperson for ALT5 Sigma stated that the company is "confident in the future development."

Flash Crash Nightmare: The Overnight Evaporation of a Trillion-Dollar Market Cap

The recent turmoil in the cryptocurrency market can be traced back to one night in October.

Driven by Trump's policies, the cryptocurrency market had been on the rise for most of the year. However, on October 10, Bitcoin, Ethereum, and dozens of other cryptocurrencies collectively experienced a massive crash, staging a flash crash.

The direct trigger for this crash was Trump's announcement of new tariffs on China, which caused a severe global economic shock. The cryptocurrency market suffered a heavy blow due to the massive leveraged funds that had been driving the market rally.

On cryptocurrency exchanges, traders can use their held crypto assets as collateral to borrow fiat currency or amplify their cryptocurrency investment positions through leveraged funds. Data from cryptocurrency research firm Galaxy Research shows that in the third quarter of this year, the global cryptocurrency lending volume grew by $200 billion in a single quarter, reaching a historical peak of $740 billion.

Prior to this, the riskiest cryptocurrency leverage trading mostly occurred in overseas markets. However, in July of this year, the largest U.S. cryptocurrency exchange Coinbase announced the launch of a new investment tool that allows traders to bet on the futures prices of Bitcoin and Ethereum with 10x leverage. Prior to this, U.S. federal regulators had lifted guidelines restricting such leverage trading, paving the way for Coinbase's new product.

In July this year, Coinbase exchange platform introduced a 10x leverage cryptocurrency trading tool

While October's flash crash did not result in an industry-wide disaster like the bankruptcy of many major cryptocurrency companies in 2022, it sounded the alarm for the market, foreshadowing the systemic crisis hidden in the cryptocurrency field.

The essence of leverage trading is that losses are magnified when the market is down. Exchanges will force liquidation, selling off clients' collateral assets, a process that often further exacerbates price declines.

The data from cryptocurrency data firm CoinGlass shows that on October 10th, at least $19 billion worth of cryptocurrency leveraged trades were liquidated globally, affecting 1.6 million traders. The liquidations were mainly concentrated on exchanges such as Binance, Huobi, and Bybit.

The sudden drop triggered a surge in trading volume, causing several major exchanges to experience technical issues, leading to traders being unable to withdraw funds promptly. Coinbase stated that they were aware of some users experiencing "delays or degraded performance during trading."

Tennessee-based software developer Derek Bartron, who is also a cryptocurrency investor, revealed that his Coinbase account was frozen during the flash crash. "I wanted to exit my position, but I was trapped," Derek Bartron said. "Coinbase effectively locked up users' funds, and we could only watch helplessly as asset values plummeted."

Derek Bartron stated that in the days following the flash crash, his cryptocurrency holdings lost around $50,000, partly due to the inability to exit positions promptly to stop the losses.

A Coinbase spokesperson responded, stating that the company provides automated risk management tools, "which functioned as intended during this market volatility, and our trading platform remained operational throughout the event."

A Binance spokesperson admitted that the exchange "experienced technical issues due to the surge in trading volume" and mentioned that measures have been taken to compensate affected users.

Crazy Experiment: The Regulatory Quandary of the Tokenization Wave

One summer night this year, cryptocurrency entrepreneurs Chris Yin and Teddy Pornprinya donned formal attire and appeared at the Kennedy Center in Washington, D.C., for a grand black-tie dinner.

The dinner was a star-studded affair. Chris Yin, in a tuxedo bought the night before, met with former Silicon Valley venture capitalist and current Vice President JD Vance; he and Teddy Pornprinya even had conversations with former hedge fund manager and current U.S. Treasury Secretary Scott Besent; the two even had a photo op with Trump, with the President giving a thumbs-up to the camera.

Chris Yin and Teddy Pornprinya's visit was aimed at paving the way for their startup, Plume. The company is advancing a disruptive innovation plan, attempting to extend cryptocurrency's underlying technology into the broader financial sector.

For months, Plume has been seeking approval from U.S. regulatory agencies, planning to build an online trading platform to issue encrypted tokens pegged to real-world assets to customers, with asset targets including shares of listed companies, farms, oil wells, and various entities.

Plume founder Chris Yin and Teddy Pornprinya posing at the Empire State Building

Currently, Plume has launched such tokenized products in overseas markets, where customers can buy and sell these asset tokens just like trading cryptocurrencies. However, this business, known as asset tokenization, is in a legal grey area in the U.S. The securities laws enacted decades ago established strict regulatory rules for the issuance of equity in various assets, requiring issuers to disclose detailed information to protect investor rights.

This year, asset tokenization has become the hottest concept in the cryptocurrency industry. Industry executives claim that tokenized stocks can make stock trading more efficient, creating a round-the-clock global trading market. The U.S.-based cryptocurrency exchange Kraken has already launched encrypted technology-based stock trading services for customers in overseas markets.

Cryptocurrency industry executives state that cryptocurrency trading is based on a public ledger, making it more transparent compared to the traditional financial system. "All transactions are traceable and auditable," said Kraken CEO Arjun Sethi. "It is almost risk-free."

Representatives from Kraken and Coinbase have met with the U.S. Securities and Exchange Commission to discuss regulatory rules for asset tokenization. Meanwhile, Plume is also seeking a legal pathway to expand its business in the U.S.

However, this race for tokenized products has raised concerns from current and former regulatory officials and executives of traditional financial giants.

In September, a Federal Reserve economist warned that asset tokenization could lead to the transmission of cryptocurrency market risks to the entire financial system, "weakening policymakers' ability to maintain payment system stability under market pressure."

U.S. Securities and Exchange Commission Chairman Paul Atkins, on the other hand, is positive about tokenized stocks, calling it a "significant technological breakthrough." "Under securities laws, the Commission has broad discretionary authority to provide regulatory support for the cryptocurrency industry. I am committed to advancing this work," Atkins said at an asset tokenization industry roundtable in May of this year.

To drive the company's business compliance efforts, Chris Yin and Teddy Pornprinya took a series of steps. In May of this year, the two met with the U.S. Securities and Exchange Commission's cryptocurrency-focused working group; they also provided chart support for the White House cryptocurrency industry report; and established the Plume U.S. headquarters on the 77th floor of the Empire State Building.

At the black-tie dinner in Washington D.C. later that summer, Trump's staff showed a keen interest in the two founders. "They knew about Plume the company," Teddy Pornprinya recalled, "Everyone was familiar with our business."

Several weeks later, Plume announced a key partnership, establishing a business relationship with World Liberty Financial, a company under the Trump family.

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