President Donald Trump’s increasingly brazen efforts to enrich himself via crypto ventures may be undoing the wider sector’s push for U.S. legislative progress.
Last week, both chambers of Congress appeared on track to approve bills governing stablecoins as well as a regulatory market structure for most other aspects of digital assets. And then they weren’t.
Late last week, the Senate circulated an updated version of its Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act that claims to address lingering concerns held by some Democrats. A confident Senate majority leader, John Thune (R-SD), initiated a process that would expedite a procedural vote on GENIUS on Thursday, May 8.
But last Saturday, nine Senate Dems issued a statement saying the updated GENIUS still had “numerous issues that must be addressed, including adding stronger provisions on anti-money laundering, foreign issuers, national security, preserving the safety and soundness of our financial system, and accountability for those who don’t meet the act’s requirements.”
The Dems said GENIUS wouldn’t receive their votes until those issues were addressed. The news was doubly surprising given that four of the objecting Dems, including Sen. Ruben Gallego (D-AZ), voted in favor of GENIUS when it cleared the Senate Banking Committee in March.
GOP senators were said to have been blindsided by the Dems’ opposition. But Gallego tweeted Sunday that he and his colleagues had been “trying to negotiate with the Republicans for weeks” and the revised GENIUS “did not include other improvements we sought.” Since the revised bill was circulated without formal briefings, a defiant Gallego warned that Dems won’t let Republicans “jam” them on this vote.
The ’foreign issuers’ line in the Dems’ statement is a shot at Tether, the highly controversial issuer of the market-leading USDT stablecoin. Under the revised GENIUS, Tether could continue to operate in the U.S. for three years without all of the constraints imposed on domestic stablecoin issuers, so long as they comply with U.S. law enforcement requests now and then.
Senate minority leader Chuck Schumer (D-NY) reportedly used a caucus meeting to push colleagues to demand tighter restrictions on Tether before giving GENIUS their vote. Other Dems were said to want tighter restrictions on President Trump’s decision to enter the stablecoin arena (more on this below), which wasn’t public knowledge until after the Banking Committee approved GENIUS.
A bipartisan meeting was held on Tuesday between Schumer and GENIUS co-sponsor Sen. Cynthia Lummis (R-WY) to reach a consensus. Lummis said she “came away with the impression that [Dems] still truly do want to get something across the finish line.” Schumer was less enthusiastic, saying only that both parties “are talking to each other about the bill.”
While pro-crypto GOP senators appear confident that GENIUS will make it across the finish line, the Dems’ belated discovery of their own spines is definitely complicating this effort. GENIUS will require 60 ‘ayes’ to pass Thursday’s vote, seven more than the GOP’s current caucus, and word has it that three Republicans—including Rand Paul (R-KY) and John Kennedy (R-LA)—still aren’t committed to voting ‘yes.’
The GOP may be pressing forward despite the uncertainty, based on their belief that Dems will be seen as the obstacle preventing regulation of the digital assets sector. The theory is that the GOP (and deep-pocketed crypto influence-peddlers) could use this to target vulnerable Dems in the 2026 midterm elections.
(That’s not a hollow threat. This week, The Nation quoted Rep. Sean Casten (D-IL) recounting a conversation with Dem colleagues who didn’t want to repeal the Biden-era crypto broker rule this spring but told Casten they feared blowback if they didn’t. “I heard a lot of them saying, ‘Look, you know I’m in a vulnerable seat. I don’t want to have a bunch of crypto money’” donated to their opponent. “That’s really scary.”)
Late Wednesday, Politico reported some key Dem crypto supporters were trying to delay Thursday’s procedural vote until next Tuesday, May 13, and use the extra time to win over more skeptics. A three-hour bipartisan meeting Wednesday morning failed to move that needle.
Even later on Wednesday, Politico reported that additional closed-door negotiations had similarly failed to reach a deal, but aides would continue the discussions into the night. Pro-crypto Sen. Kirsten Gillibrand (D-NY), who is leading negotiations on behalf of the Dems, said it’s “all on the leadership level now” but she remained “hopeful” consensus could be reached before the vote is called Thursday.
Market restructure
Things aren’t much better in the House of Representatives, where a planned hearing on a new market structure bill was derailed before it even started.
On May 5, the House Agriculture and Financial Services committees released a discussion draft of an as-yet untitled bill that would impose America’s first official digital asset regulatory structure. The draft is an updated version of the FIT21 legislation that was approved by the House one year ago.
While my colleague James Field will be along directly with a more comprehensive analysis of the new draft, we’ll briefly spotlight a few of the text’s more substantive changes.
These include a definition of ‘affiliated person’ that requires projects to identify individuals who hold more than 1% of a token’s total supply, a significant reduction from FIT21’s 5% threshold. These individuals would face certain time-/amount-related restrictions on selling/trading their tokens. Additional restrictions would be based on whether the blockchain on which the tokens are issued is sufficiently “mature,” aka not under the “common control” of any group or individual.
This ‘mature’ designation will determine whether a project is governed by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). The SEC would take point until said ‘maturity’ is achieved, after which the CFTC takes over. The idea here is to allow blockchain projects a ‘pathway to raise funds’ under the SEC’s allegedly watchful eye.
Secondary sales of tokens (on exchanges) wouldn’t count as securities transactions under the Howey test, provided they don’t offer “an ownership interest” in the token issuer or a share of its revenue/profits. So-called ‘primary transactions’ involving insiders aren’t granted the same leeway.
The draft also defines decentralized finance (DeFi) projects as those that don’t require third-party custody of tokens and allow users to “engage in a financial transaction in a self-directed manner” without any third-party assistance.
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Which one is the kids’ table?
The Financial Services and Agricultural committees scheduled a joint hearing on the market structure draft for Tuesday, but the hearing came under immediate threat from Democratic reps, including Financial Services ranking member Maxine Waters (D-CA).
On Monday, word broke that Waters planned to object to the hearing before it got going and then lead the Democrat reps on a mass walkout. Since joint hearings require unanimous consent from those on the dais, the protest would inject formaldehyde into the proceedings.
Ahead of this move, Waters reportedly called Financial Services chair French Hill (R-AR) to demand a revision to the draft that would restrict Trump’s crypto profiteering. Given the knee-buckling terror displayed by the entire GOP caucus at any suggestion of pushing back against Trump’s wishes, this was never going to fly.
Come Tuesday, Waters did object and (most) Dems did walk out, but not before some (literally) yelled a list of Trump’s lucrative crypto grifts into the Congressional record. Various GOP reps responded by shouting down their Dem colleagues, and the entire enterprise was brought to a screeching halt.
Both parties then decided to hold dueling ‘round tables’ to discuss the crux of the matter (as each side saw it). The Dems’ table focused on reining in Trump’s ability to use the office of the president to pad his bottom line, while the GOP focused on the legislation at hand with the occasional detour into calling the Dems’ crybabies.
The parties then duked it out via their rival X accounts, with the GOP saying their roundtable featured the “adults” in the room, while the Dems claimed the GOP ‘adults’ are “too scared to stand up to a President breaking the law right in front of us … Go find some courage, cowards.”
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The Dems’ breaking point followed a series of damning articles in the New York Times summarizing the sheer brazenness of Trump’s crypto cash grabs.
One report from April 29 quoted private messages sent to an unidentified ‘crypto startup in the Cayman Islands’ from Zachary Folkman, co-founder of Trump’s DeFi project World Liberty Financial (WLF). Folkman offered the startup a “partnership” in which “the firms would buy each other’s digital coins.”
However, the Times said “the startup would have to make, in effect, a secret multimillion dollar payment” to WLF to secure the deal. Three different deals analyzed by the Times showed that these deals were lopsided, in that WLF would purchase a much smaller amount of the other firms’ tokens, resulting in a ‘premium’ for WLF of as much as 20% of the value of the WLF acquired by the other companies.
Folkman told the Cayman startup that “other business partners had committed between $10 million and $30 million” to WLF to secure their deals. At the upper end of this range, WLF would have netted between $2 million and $6 million per deal. At least five firms are believed to have struck such deals with WLF.
This appears to confirm previous reporting that WLF’s ‘reciprocal’ token purchase deals required the firms on the other sides of these deals to ante up seven-figure ‘fees,’ based on the suggestion that any public association with WLF was good ‘exposure’ for a token project. There was also an ‘act now’ ticking-clock component, as projects were told there was a ‘first come, first served’ deal policy.
One of the firms approached by WLF was SonicLabs, whose founder, Andre Cronje, called WLF “a black spot on our industry.” Dominik Schiener, founder of Berlin’s IOTA Foundation, said his firm “immediately rejected” what he called WLF’s “very dishonest approach.”
WLF spokesman David Wachsman told the Times it was “false, absurd and dangerous” to suggest there was “some sort of political quid pro quo” in WLF’s dealmaking. Wachsman insisted WLF’s deals were “thoughtful, strategic exchanges between parties who stand to mutually benefit.”
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Unstablecoin
In a follow-up article on May 1, the Times addressed Trump’s USD1 stablecoin, which has amassed a $2.1 billion market cap mere weeks after it was first announced. USD1 ranks seventh in terms of the largest stablecoins, well ahead of other high-profile stablecoins that launched months or even years ago, following last week’s abrupt $2 billion rise in its market cap.
At last week’s Token2049 conference in Dubai, WLF co-founder Zach Witfkoff—son of Trump’s Mideast envoy Steve Witkoff—revealed to the audience that it was Abu Dhabi investment firm MGX Fund Management that purchased the $2 billion in USD1. Zach said MGX planned to use the USD1 to fund a $2 billion investment in Binance, the world’s leading digital asset exchange.
There are all sorts of questions sparked from this revelation, including why MGX—which has over $100 billion in assets under management—would bother converting cash to USD1 to make the Binance investment. Unless, of course, the plan is for Binance to never redeem its USD1, which would allow WLF to invest the principal in yield-bearing instruments and collect the rewards.
It was previously reported that Binance is negotiating a deal in which the Trump family would take a stake in the U.S.-facing Binance.US exchange. Binance has already allowed USD1 to be traded on its in-house BNB Chain and is reportedly in discussions to list USD1 on its main exchange.
On May 5, Binance announced that USD1 had been given fee-free transfer privileges on BNB Chain, meaning Binance is effectively subsidizing USD1 use, while also “recruiting” other centralized exchanges and cross-chain bridges to adopt/support USD1.
Binance has several reasons for buttering Trump’s bread, including a desire to lift the transaction monitors Binance was forced to onboard following its $4.3 billion criminal settlement with U.S. authorities in November 2023. Binance founder Changpeng ‘CZ’ Zhao is also said to be angling for a Trump pardon of his felony criminal conviction stemming from that same settlement.
This week, CZ gave an interview in which he confirmed that his lawyers have officially applied for a Trump pardon. CZ insisted that he’d only done so after mainstream media reported on his pardon pursuit, after which he figured he “might as well apply.” Well, sure.
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Crypto dinners
On May 5, the Trump-supporting MAGA Inc. super PAC hosted a ‘Crypto & AI Innovators Dinner’ at Trump National Golf Club in Virginia, charging attendees $1.5 million a plate to listen to the president speak. Among the non-paying attendees was David Sacks, Trump’s ‘AI & Crypto Czar.’ Beyond that, there’s been zero reporting on who anted up the millions and what Trump/Sacks may have told them.
Dems were already apoplectic over Trump’s plan to host an ‘intimate private dinner’ for the top 220 holders of his $TRUMP memecoin. News of the dinner, which is set for May 22 at the same golf club, sparked a major rally in $TRUMP’s fiat price. The Get Trump Memes website launched a leaderboard so everyone could monitor how much more $TRUMP they needed to buy to ensure a dinner invite (or a ‘VIP White House Tour’ for the top 25 holders).
Even some pro-crypto Republicans like Sen. Lummis found Trump’s dinner to be flying too close to the sun. CNBC quoted Lummis saying, “This is my president that we’re talking about, but I am willing to say that this gives me pause.”
Trump promoted the dinner contest on his Truth Social account earlier this week, yet played dumb when queried by NBC News’ Kristin Welker over whether he’s profiting off his memecoin. Trump claimed he hadn’t even “looked” at whether or not he’s making bank off $TRUMP and ignored Welker’s attempts at follow-up questions.
On May 6, new data from blockchain analysts Chainalysis shows that 764,000 wallets holding $TRUMP had lost money on their purchase, while 58 wallets had made over $10 million apiece. Collectively, these fortunate 58 were $1.1 billion in the black on their $TRUMP buys. The token’s creators have made over $324 million in fees since $TRUMP’s launch in mid-January.
On May 7, Bloomberg reported that all but six of the top 25 $TRUMP wallets acquired their tokens via digital asset exchanges based outside the U.S. that claim to bar U.S.-based customers. Of the top 220 wallets holding $TRUMP, “at least 56% used similar offshore exchanges.”
Bloomberg allowed for the fact that U.S. users might have utilized virtual private networks (VPNs) to access the foreign exchanges, although that would call into question the seriousness (or even the existence) of these exchanges’ ‘know your customer’ policies.
The foreign $TRUMP purchases soared following the April 23 dinner announcement, dwarfing the number of large U.S. purchases in the same timeframe. One of the largest wallets that has registered for the contest is a wallet belonging to the Seychelles-based HTX (formerly Huobi) exchange that bears the username ‘Sun.’ Tron network founder Justin Sun has often been linked to HTX, although he publicly claims to be merely an adviser.
Similarly, Bloomberg found that nearly half of the top 50 holders of WLF’s governance token WLFI “used cryptocurrency services that aren’t available in the U.S.” Three-quarters of WLFI sales revenue goes to a Trump-controlled entity. Justin Sun acquired $75 million worth of WLFI and was later named a WLF advisor.
WLF recently celebrated the fact that Trump’s USD1 is now listed on HTX, marking the stablecoin’s first listing on a centralized exchange. For the record, Sun was on stage in Dubai with Zach Witkoff and Trump’s son Eric when the MGX/Binance/USD1 announcement was made, to which Sun offered up a thoroughly convincing “Wow.” Wow, indeed.
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We do trucking, we don’t do subtle
The major knock on $TRUMP, WLF and Trump’s numerous other crypto grifts is that they allow corporations, foreign entities and anyone else who wants something from Trump to put money in his pocket without anyone but Trump knowing about it. Worryingly, some companies no longer appear to care whether the world knows about these pay-to-play efforts.
On April 30, Freight Technologies, aka Fr8Tech, a Houston-headquartered long-haul trucking firm, announced that it was following in the token-hoarding footsteps of Strategy/MicroStrategy (NASDAQ: MSTR) and the recently announced Twenty-One Capital.
But instead of buying and sitting on millions/billions’ worth of BTC, Fr8Tech is planning to raise $20 million that will be “exclusively earmarked for purchasing Official Trump Tokens ($TRUMP), making Fr8Tech one of the first public companies to make $TRUMP a cornerstone of its digital asset strategy.”
Trump’s economic tariffs are taking a heavy toll on cross-border commerce, and Fr8Tech’s press release gives an unsubtle nudge-nudge-wink-wink as to what it hopes to accomplish by putting $20 million in the president’s pocket.
“Mexico is the United States’ top goods trading partner, with Mexico being the leading destination for U.S. exports and the top source for U.S. imports … We believe that the addition of the Official Trump tokens are an excellent way to diversify our crypto treasury, and also an effective way to advocate for fair, balanced, and free trade between Mexico and the U.S.”
Tony Carrk, executive director of non-profit watchdog Accountable.us, said it was “just another day for Donald Trump that an international freight company is paying a $20 million tribute towards the Trump family fortune after openly wishing it will lead to administration tariff relief.”
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Wait, we can do something about it?
Dems’ outrage is finally resulting in legislative action, or at least, proposals for action to rein in Trump’s crypto excesses.
On May 6, Sen. Richard Blumenthal (D-CT) announced that the Permanent Subcommittee on Investigations—on which Blumenthal is ranking member—was opening a preliminary inquiry into $TRUMP, WLF and other Trump-associated business ventures.
The inquiry is based on reporting that Trump may be enabling the violation of government ethics requirements, facilitating financial transactions with foreign nationals under federal prosecution, taking investments from foreign governments and potentially violating federal laws.
Blumenthal said “this threat is not hypothetical,” noting Justin Sun’s position atop the $TRUMP wallet leaderboard. The subcommittee has sent letters to both the company behind $TRUMP and WLF, seeking answers to awkward questions and telling them to produce/preserve digital communications and other business records.
The same day, Sen. Chris Murphy (D-CT) introduced the Modern Emoluments and Malfeasance Enforcement (MEME) Act, an 11-page bill that would bar the president and members of Congress from engaging in or benefiting from “prohibited financial transactions.” Said transactions include those involving “a digital asset that can be sold for remuneration, including a cryptocurrency, a meme coin, a token, or a non-fungible token.”
Murphy said $TRUMP was “the single most corrupt act ever committed by a president … this president will do whatever it takes—even selling access to the White House—to make himself richer. This is not normal, and we won’t let him get away with it.”
Also that same day, majority leader Schumer and Sen. Jeff Merkley (D-OR) introduced the End Crypto Corruption Act, a 10-pager that would prohibit the president, vice-president, members of Congress, other members of the executive branch and everyone’s immediate families from enriching themselves via crypto boondoggles.
Merkley said the ability of individuals to cultivate influence with Trump via his crypto ventures represents “a profoundly corrupt scheme. It endangers our national security and erodes public trust in government. Let’s end this corruption immediately.”
Not wanting the House to miss this parade, Rep. Ritchie Torres (D-NY) reportedly plans to introduce the Stop Presidential Profiteering from Digital Assets Act. The full text hasn’t yet surfaced, but its broad strokes appear similar to the Senate efforts.
Does any of this mean anything? Not really. The GOP has majorities in both chambers, and Trump’s disdain for the norms of propriety has reached new heights (or lows, depending on your perspective). But all the public outrage is garnering additional media attention, which could help sway some of the more moderate members of Congress to rethink their willingness to be viewed by history as an accomplice to Trump’s thievery.
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