Donald Trump's Crypto Ties Could Be A Banana Skin For The Industry: Report

The cryptocurrency industry's increasingly close alignment with president Donald Trump and the Republican Party has put its future at the mercy of American electoral cycles, raising concerns about political overreach, regulatory uncertainty and reputational damage.

What Happened: Once hailed as a decentralized alternative to entrenched financial institutions, crypto now finds itself entangled in the very power structures it once sought to disrupt, according to an article by The Economist.

Over the past six months, the industry has entrenched itself in U.S. political life, with top crypto firms among the largest political donors and Trump-aligned officials and family members holding major crypto investments.

This shift has sparked concern that the sector, once ideologically neutral and globally oriented, has effectively become a partisan tool.

"No industry that becomes so associated with one party can be immune to the mood swings of the American electorate," the article satted.

In embracing Trump as a political ally, crypto firms may have inadvertently tethered their future to his political fortunes, it added.

This marks a stark departure from crypto's founding ethos.

Originally envisioned as a libertarian, anti-establishment alternative to centralized finance, the sector was meant to empower individuals and resist state overreach.

Today, it is deeply intertwined with U.S. power structures, often to its own detriment.

The industry's credibility has taken a hit due to allegations of financial misconduct and growing conflicts of interest, with the Trump family’s holdings now reportedly worth billions.

While regulators in Europe, Asia, and the Middle East have moved toward clearer crypto rules without political entanglements, the U.S. has veered in the opposite direction.

Under the Biden administration, regulatory bodies like the SEC pursued aggressive enforcement, prompting crypto firms to turn to the courts.

But now, with Trump's resurgence, many of those cases have been dropped, and regulation has stalled.

A recent Senate bill aimed at clarifying crypto’s legal status failed to move forward after bipartisan support collapsed, an outcome linked in part to concerns over Trump's personal involvement in the sector.

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Why It Matters: Meanwhile, the underlying blockchain technology continues to find traction.

Tokenization of real-world assets like treasuries and private credit has nearly tripled in 18 months.

Traditional firms such as BlackRock BLK, Mastercard MA, and Stripe are entering the space through stablecoins and tokenized products.

But their cautious approach stands in contrast to the politicized chaos enveloping much of U.S. crypto policy.

Critics argue the industry’s aggressive push for influence during the Biden years may have been understandable given regulatory hostility, but the pendulum has now swung too far.

The lack of formal rules leaves room for instability.

As evidenced by the 2023 failures of crypto-exposed banks like Silvergate and Signature, unchecked risk can have real consequences.

Stablecoins, in particular, remain susceptible to rapid withdrawals and should be regulated more like banks.

The current dynamic, where crypto policy is shaped by electoral strategy rather than systemic planning, undermines long-term legitimacy.

Despite the short-term gains for the Trumps, the broader sector may ultimately lose.

"Crypto has been good to the Trumps. But ultimately the benefits of this deal will flow only one way,” the article states.

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