The Year Trump Embraced Cryptocurrency
Original Title: What Trump’s Embrace of Crypto Has Unleashed
Original Authors: David Yaffe-Bellany, Eric Lipton, The New York Times
Translation: Peggy, BlockBeats
Editor's Note: From the "Crypto President's" political endorsement to the rapid spread of DAT Treasury companies, tokenized stocks, and high-leverage trading, the crypto industry is advancing at an unprecedented pace towards the boundaries of traditional finance and public policy. New products, structures, and capital paths continue to emerge, portrayed on one hand as technological breakthroughs that enhance efficiency and reshape financial infrastructure, and on the other hand, accumulating concerns in lending, governance, and risk transmission.
As regulatory attitudes shift towards permissiveness and capital accelerates its entry, this experiment driven by policy, capital, and technology is gradually moving from industry-specific issues to potentially affecting structural issues in the broader financial system.
The following is the original text:
This summer, a group of executives presented a business plan to Wall Street financier and former brief Trump adviser Anthony Scaramucci.
They wanted Scaramucci to join a publicly traded company with a rather peculiar strategy: accumulating a large amount of cryptocurrency to make the enterprise more attractive to investors.
"They didn't really need to sell me on it," Scaramucci said. Shortly thereafter, he was publicly revealed as an advisor to three previously little-known companies employing the same strategy. "That conversation was quite casual."
But this enthusiasm did not last long. This fall, the crypto market experienced a steep crash, and the share prices of the three companies Scaramucci was involved with plummeted, with the worst-performing one dropping over 80%.
These companies were part of a wave of crypto fervor driven by Trump. Trump elevated the once relatively fringe world of digital currency to a prominent position in the global economy. He dubbed himself the first "Crypto President," ended regulatory crackdowns on crypto companies, openly promoted crypto investment in the Oval Office, signed multiple pro-crypto bills, and even launched a meme coin called $TRUMP.
Now, the consequences of this enthusiastic endorsement are starting to become apparent.
This year, a series of boundary-pushing new crypto businesses have emerged, exposing more people directly to the highly volatile world of digital currencies. Over 250 publicly traded companies are now accumulating cryptocurrency, and the price volatility of these digital assets is no different from traditional investments such as stocks and bonds.
Meanwhile, a cohort of companies has launched new products, making it easier to allocate crypto assets in brokerage accounts and retirement plans. Industry executives are also lobbying regulators to introduce tokens representing ownership in public companies and to trade in a "stock market" driven by cryptocurrency technology.
This wave of experimentation has already encountered problems. Over the past two months, major cryptocurrency prices have plummeted, sending companies with significant holdings into a freefall. Other new projects have also drawn warnings from economists and regulators, citing the mounting risks involved.
One of the key concerns is the rise of leverage. By this fall, publicly traded companies had used large loans to purchase crypto assets; at the same time, investor bets on future coin prices have exceeded $200 billion. These trades often rely on leverage, which can lead to massive gains if the bet is correct but equally significant losses if it goes wrong.
The latest industry products have further interconnected crypto assets with the stock market and other parts of the financial system, increasing the potential for a "domino effect," where a crypto crisis could spill over into broader economic sectors.
"The line between betting, speculation, and investment has largely disappeared," said Timothy Massad, who served as Assistant Secretary for Financial Stability at the U.S. Treasury Department after the 2008 financial crisis. "This worries me a lot."
White House Press Secretary Karoline Leavitt stated that Trump is working to turn the U.S. into the "Crypto Capital of the World" by promoting innovation and economic opportunity.
Crypto industry executives view these new businesses as demonstrating the technology's potential to reshape the antiquated financial system. They see market fluctuations as a potential source of profit.
"The risks are higher, but the potential returns are also higher," said Duncan Moir, CEO of 21Shares. The company issues various financial products to make investing in crypto assets more accessible. "Our job is to bring these investment opportunities to more people."
All this experimentation has flourished in an unprecedentedly crypto-friendly regulatory environment for crypto companies. After years of legal battles with the industry, the U.S. Securities and Exchange Commission (SEC) established a crypto special working group in January of this year and has held dozens of meetings with companies seeking new rules or product approvals.
An SEC spokesperson stated that the agency is working to "ensure that investors have access to full information to make informed decisions."
The U.S. Securities and Exchange Commission's Washington headquarters, which established a Cryptocurrency Task Force this year. Image source: Jason Andrew/The New York Times
Many of these new-age businesses have some kind of connection to the expanding cryptocurrency empire of the Trump family, further blurring the line between business and government.
This summer, the management of Trump-owned cryptocurrency startup World Liberty Financial announced that they would join the board of directors of the publicly traded company ALT5 Sigma. The company previously operated a recycling business but now plans to raise $1.5 billion to invest in digital currencies.
「The Surge」
The crypto community has coined a term for this high-risk, highly emotional era ushered in by the Trump administration, calling it "DAT Summer" (DAT standing for Digital Asset Treasury).
A Digital Asset Treasury company is a publicly traded company whose core goal is to acquire as much cryptocurrency as possible. According to the crypto advisory firm Architect Partners, just under half of these newly formed companies have chosen Bitcoin, the most well-known cryptocurrency, as their primary asset. However, dozens of companies have announced plans to stock up on lower-profile coins like Dogecoin.
Since the beginning of this year, new Digital Asset Treasury companies have been established every month, showing a clear upward trend.
Note: Data as of December 16. Source: Architect Partners, The New York Times
These projects often follow a relatively simple operational path: a group of executives first target a relatively low-profile publicly traded company—such as a toy manufacturer—that itself aims to build a cryptocurrency reserve. Subsequently, this team partners with the company to raise millions of dollars from wealthy investors, which is then used to buy digital currencies.
The main purpose is to indirectly expose investors to cryptocurrency price fluctuations by having them buy a "stock-like" asset. This could potentially be a profitable business. Some investment funds and asset management firms have been reluctant to directly invest in cryptocurrency, in part because the custody process for crypto assets is complex, costly, and often a target for theft and hacks.
By investing in a Digital Asset Treasury (DAT), a fund manager can outsource these cumbersome operations. However, DATs have proven to be equally risky. Many such companies were founded hastily or are run by executives lacking experience in public company operations. According to Architect Partners, these companies collectively have announced plans to borrow over $20 billion to purchase crypto assets.
“Financial crises often start with leverage,” said Corey Frayer, a former SEC crypto adviser, “and what is being created now is a ton of leverage.”
In fact, some companies have already faced operational difficulties or management crises, leading to investor losses. For example, the treasury-style company Forward Industries had accumulated a large amount of a token called Solana. In September of this year, following a fundraising round from private investors that raised over $1.6 billion, its stock price briefly soared to nearly $40 per share.
Among the investors was Allan Teh from Miami, representing a family office investment, who had put $2.5 million into Forward this year.
“Everyone at the time thought, this strategy will definitely work, and the asset price will keep rising,” Teh said.
However, a market correction followed, and Forward’s stock price dropped to as low as $7 per share earlier this month. The company then announced plans to buy back its own stock for up to $1 billion over the next two years, but this move did not halt the continued decline in the stock price.
“The music stopped. Now I’m starting to second-guess, should I exit?” said Teh, who is now down about $1.5 million, “How much of a loss am I ultimately willing to take on these things?” Forward declined to comment on this.
The surge in DATs has raised high alertness at the SEC. “Obviously, there is concern here,” said SEC Chairman Paul Atkins in an interview at a crypto conference in Miami last month, “We are watching closely.”
However, behind this emerging corner of the crypto world is a powerful supporter—the Trump family.
Founders of World Liberty Financial include Eric Trump (right) and Zach Witkoff. In May of this year, the two appeared together at a crypto conference in the United Arab Emirates. Image Source: Katarina Premfors/The New York Times
In August of this year, World Liberty Financial announced that its founding team — including the President's son Eric Trump — would join the board of directors of the publicly traded company ALT5 Sigma. The company plans to accumulate a large amount of WLFI, a token issued by World Liberty itself. (Currently, Eric Trump is listed as a strategic advisor and observer.)
This arrangement appears poised to quickly benefit the Trump family. According to a revenue-sharing agreement disclosed on the World Liberty website, whenever the WLFI token is transacted, a business entity owned by the Trump family can receive a portion of the profits.
However, following this, the operational situation of ALT5 Sigma began to deteriorate. The company revealed in August that executives of one of its subsidiaries had been convicted of money laundering in Rwanda, and the board of directors is reviewing other "previously undisclosed issues." Shortly after, ALT5 Sigma announced the suspension of the CEO and the severing of ties with two other senior executives.
Since August, the company's stock price has fallen by 85%. A spokesperson for ALT5 Sigma stated that the company still "remains optimistic about the future."
Flash Crash
Most of the recent turbulence in the crypto market can be traced back to one night in October.
Fueled by public support from Trump, the crypto market had been rising throughout the year. However, on October 10, Bitcoin and Ethereum prices suddenly plummeted, dragging down dozens of other tokens.
This was a classic "flash crash," with prices collapsing sharply in a very short period.
The immediate trigger was Trump's announcement of new tariffs on China, which sent shockwaves through the global economy. However, the reason crypto asset prices suffered a particularly heavy blow was the large scale of leverage in the market.
On crypto trading platforms, traders can use their assets as collateral to borrow cash or leverage again, making larger-scale bets on digital currencies. According to crypto data firm Galaxy Research, in just the third quarter, the global crypto asset-based lending volume increased by $20 billion, soaring to a record $74 billion.
The most aggressive, highest-risk crypto trades typically occur in overseas markets. But in July of this year, the largest U.S. crypto exchange Coinbase announced it would launch an investment tool allowing traders to borrow funds equivalent to 10 times their holdings to speculate on the future prices of Bitcoin and Ethereum.
The background to Coinbase's launch of this product is that federal regulators have withdrawn previous guidance restricting such high-leverage lending, making this type of operation possible again in the United States.
In July of this year, Coinbase announced that it would launch an investment tool allowing traders to borrow up to 10 times their holdings to bet on the price movements of Bitcoin and Ethereum. Photo Source: Gabby Jones/The New York Times
The October sell-off did not trigger a systemic industry-wide disaster similar to the one in 2022 when several large crypto companies went bankrupt in succession. However, it provided a clear preview: a crisis that could engulf the entire crypto world and how it might unfold.
Mechanically, lending amplifies losses in a downward market. As prices fall, exchanges are forced to sell off clients' collateral assets—a process known as "liquidation"—which often further drives down prices.
According to industry data tracking firm CoinGlass, on October 10th, at least $19 billion in global leveraged crypto bets were forcibly liquidated, affecting 1.6 million traders. Liquidations were primarily concentrated on overseas exchanges, including Binance, OKX, and Bybit.
This crash led to a surge in trading volume, with some traders experiencing technical issues when trying to move funds on major exchanges. Coinbase stated that some customers may have experienced "delays or degraded performance" during trading.
Derek Bartron, a software engineer and crypto investor from Tennessee, said his Coinbase account was temporarily frozen. "There was no way to close my positions if I wanted to," he said. "It felt like Coinbase had almost everyone 'locked' in their accounts, unable to access rescue funds, and forced to ride the roller coaster."
Bartron said that over the following days, he lost approximately $50,000 in crypto assets, in part because he couldn't sell his holdings at the right time.
A Coinbase spokesperson responded that the company provides automated risk management tools, "which operated as designed, and the exchange remained operational throughout the event."
A Binance spokesperson acknowledged that the platform "did experience some tech issues" due to significantly increased trading volumes and stated that steps have been taken to compensate users.
Experiment
One summer evening, cryptocurrency entrepreneurs Chris Yin and Teddy Pornprinya arrived at the Kennedy Center in Washington, D.C., to attend a black-tie formal reception.
It was a high-profile social event. Yin, wearing a tuxedo he had bought the night before, introduced himself to Vice President JD Vance, a former Silicon Valley investor; he and Pornprinya also chatted with Treasury Secretary Scott Bessent, a former hedge fund manager; the two even had their photo taken with Trump, who gave a thumbs-up to the camera.
These two entrepreneurs were paving the way for another bold plan proposed by the industry this year: extending the underlying architecture of blockchain technology to other financial sectors.
For months, their startup, Plume, has been applying for licenses from U.S. regulatory agencies, hoping to launch an online platform that would allow users to purchase digital tokens representing "real-world assets" — which could be a company, a piece of farmland, or even an oil well.
Plume's co-founders, Chris Yin (right) and Teddy Pornprinya, pictured at the Empire State Building, which also serves as their U.S. office location. Image Source: Laila Stevens/The New York Times
In international markets, Plume's customers can purchase "shares" of such products and trade them like any other tokens. However, this service, known as "tokenization," operates in a legal gray area in the U.S. This is because the U.S., under decades-old securities laws, imposes strict regulatory requirements on any form of "share" sale.
The core purpose of these rules is to protect investors through mandatory disclosure, requiring stock issuers to publicly disclose detailed operational, financial, and risk information. As a result, the tokenization of real-world assets and their external trading face much higher compliance hurdles in the U.S. than in overseas markets.
Plume is seeking approval from U.S. regulatory agencies to launch an online platform for tokenization. Image Source: Laila Stevens/The New York Times
This year, tokenization has become one of the hottest concepts in the crypto industry. Industry executives believe that "tokenized stocks" can make stock trading faster and more efficient, creating a 24/7 global market, allowing shares to continuously circulate worldwide. The U.S.-based major exchange Kraken has already provided an overseas crypto-based stock trading market for its clients.
In the crypto world, transactions are recorded on a public ledger, making it more transparent compared to traditional finance, industry executives say. "It's traceable, auditable," said Arjun Sethi, CEO of Kraken, "It's almost the opposite of risk."
Representatives from Kraken and Coinbase have already met with the U.S. Securities and Exchange Commission (SEC) to discuss regulatory rules for tokenized assets; meanwhile, Plume is seeking a viable legal pathway to expand its business to the U.S. mainland.
However, this "race to the top" has also raised concerns among current and former regulators, as well as heavyweight executives in the traditional finance sector. In September, an economist from the Federal Reserve System of the United States pointed out that tokenization could transmit the financial shock of the crypto market to the broader economy and "undermine policymakers' ability to maintain the integrity of the payment system" during stressful periods.
Nevertheless, SEC Chairman Paul Atkins has expressed a positive attitude toward tokenized stocks, calling it a significant technological advancement. In May of this year, he stated at a tokenization industry roundtable, "The Commission has significant discretion under the securities laws to make appropriate arrangements for the crypto industry, and I intend to move this forward."
To secure a favorable position, Plume's two founders, Chris Yin and Teddy Pornprinya, are pulling out all the stops: they met with the SEC's crypto task force in May; provided visual content for a White House crypto report; and established a U.S. headquarters for Plume on the 77th floor of the Empire State Building.
At a black-tie gala in Washington this summer, Trump's core staffers seemed to show appreciation for the two founders.
"They know Plume," Pornprinya said, "Everyone has heard of us."
Weeks later, Plume announced another potential key connection: a business partnership with the Trump family's crypto company, World Liberty.
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